Financial powers of attorney are essential for older adults. They help ensure that vulnerable people have someone competent and trustworthy to manage their assets in an emergency scenario.
However, many successful adults worry about the implications of surrendering control over their resources to another person. Even though powers of attorney only take effect during periods of incapacitation, it is only natural to worry about an agent potentially abusing their authority. Implementing the three limitations on agent authority outlined below could be helpful.
1. Limit financial access
Powers of attorney can be incredibly broad unless people integrate specific language into their documents. Bespoke powers of attorney can provide very clear limitations on the authority granted to an agent. The principal drafting the documents may want to only give their agent access to a single financial account. They may only empower the agent to conduct specific types of transactions, such as making monthly minimum payments toward mortgages and credit card balances.
2. Appoint a co-trustee
Even with appropriate restrictions, many people worry about the possible temptation that comes with having access to financial resources. Appointing a co-trustee who must approve all major financial transactions is one way to prevent a scenario in which an agent abuses their authority.
3. Delay the transition of authority
Powers of attorney typically take effect as soon as an individual becomes incapacitated. They retain their legal authority until the individual dies or recovers. Principals can potentially restrict powers of attorney by requiring that incapacitation last a minimum amount of time before an agent can assume authority over their finances.
Exploring different strategies for crafting powers of attorney can help people feel more confident about their protection. Proper limitations on authority can be important protections against the abuse of financial authority.