Power of attorney (POA) is a crucial estate planning document that hands over authority to another person. If you cannot care for yourself or make decisions, your appointed agent will decide on your behalf. That’s why it’s crucial to carefully consider the extent of authority you hand over to them with the help of a family law and estate planning law firm in San Antonio.
It is important to note that there are different kinds of powers of attorney and they can be customized. However, a Medical Power of Attorney cannot be combined with a financial power of attorney. They must be two separate documents, even though the same person can be named as agent in both.
Confusion often arises regarding what an agent with power of attorney can or can’t do. For example, can a power of attorney change estate beneficiaries? While the document does give substantial legal and financial authority, it also has several limitations.
What Can an Agent with Power of Attorney Do?
An agent with any type of power of attorney has a legal responsibility to act in good faith and keep up with the principal’s reasonable expectations. That means the agent must always prioritize the principal’s best interest with the scope of the authority specified in the POA.
Besides, the agent must always act to preserve the principal’s estate plan and preserve it if they know about it. So, the principal should inform the agent about their estate plan and furnish them with the name of the attorney who prepared it. If possible, it would also be helpful to include the name in the POA.
Overall, the agent must act loyally, cooperate with the principal’s health care provider, avoid conflicts of interest, and keep accurate records. In the case of a Medical Power of Attorney, the agent needs to know the principal’s desires regarding life support, since the principal may be called upon to make that decision and is supposed to do what the principal would have wanted, regardless of the agent’s personal beliefs.
Power of Attorney and Beneficiaries
A power of attorney can only do what the principal outlines in the POA document. However, the power can be very broad. An agent with a financial power of attorney may have the authority to take possession of all your assets, and an agent with a medical power of attorney may literally hold your life in their hands. That’s why it’s always advisable to seek the legal counsel of an estate planning lawyer in San Antonio when drafting the POA document. Even if a fill-in-the-blank form is used, the language in the form may be outdated or misunderstood.
Many financial powers of attorney have a catch-all “all of the above” clause that would include the power to change beneficiaries, so if that is not the intention of the principal, they must be careful not to initial by that “all of the above” section. If the document doesn’t give authority to the agent to change the beneficiaries of retirement, insurance policies, or banking accounts, then they can’t legally do so. However, if this is something the principal wants to do, they can always create a new POA agreement and list this specific function.
Once the new financial POA document allows the agent to change beneficiaries, the agent can change the financial beneficiaries. The POA must adhere to the fiduciary duties of the principal. In other words, they can’t name themselves as a beneficiary or someone the principal would disapprove of, and they must be careful to not fall victim to a scheme that would defraud the principal.
Changing a beneficiary, if the POA document allows it, is simple. The agent would only be required to visit the relevant financial institutions to make the changes. They must present the POA document that bestows this power and allow the institution to review it carefully. However, keep in mind that the financial institution does not have to accept the power of attorney if they suspect that the agent is abusing his or her authority.
Automatic Beneficiary Designations
Sometimes, an agent may not change beneficiary designations on accounts that should pass to named beneficiaries. These include payable-on-death and joint accounts. The only exception is if a power of attorney explicitly grants the agent the authority to change beneficiaries on these accounts.
An agent may be liable for damages if they change the automatic beneficiary designation. Even if authorized to do so, the agent may expect to be sued by the beneficiary who was removed, so extreme caution should be used to preserve evidence that it was done at the direction of the principal.
What Other Powers Does a POA Have?
The principal determines the scope of the agent’s authority. Depending on the principal’s directive, an agent with power of attorney can:
- Open an account but must first meet certain requirements and present specific documents
- Be a beneficiary, for example, if they’re a spouse to the principal
- Create an irrevocable trust
- Pay themselves at an hourly rate or general compensation for their service
- Keep the principal’s family away in certain circumstances, for example, when making medical decisions on behalf of the principal
- Involve siblings, meaning that a principal can appoint two or more parties as a power of attorney
- Cash checks
- Refuse to be assigned as an agent
An estate planning lawyer in San Antonio can provide legal counsel on other powers a principal may or may not bestow in a POA.
Are There Things a Power of Attorney Can’t Do?
Unless the principal expressly states otherwise in the POA instrument, an agent doesn’t have the authority to:
- Give away the principal’s property
- Waive the principal’s position as a beneficiary of a joint and survivor annuity
- Change beneficiary designations
- Create or change survivorship rights
- Create a trust for the principal or change an existing one
The principal can grant one or more of these powers in the “Special instructions” section of the statutory form. When a principal decides to give any of the above powers to their agent, they should consider making it clear who is eligible to be a beneficiary.
Given the potential for agents to abuse these powers, it would be prudent for the principal to name co-agents and require that they act together. Alternatively, the principal may need the agent to be answerable to another family member or trust advisor about how they exercise their powers. It’s essential to consult a San Antonio estate planning lawyer before granting the powers.
Who Can Challenge the Actions of a Power of Attorney?
If an agent with POA exercises more power than what the principal authorized, the principal can challenge or revoke the POA. The principle on which this can happen is a Breach of Trust or Breach of Fiduciary Duty that causes damage to the principal. Misusing powers violates the fiduciary duty, and the principal can sue the agent and have him charged with a crime.
Additionally, anyone who believes that an agent with POA is not acting in the principal’s best interest can challenge the attorney. Such individuals may ask the court to review the agent’s behavior. However, the principal can ask the court to dismiss the case. The court will honor the request unless the principal is incapacitated.
A Skilled Estate Planning Attorney Protecting Your Assets
Creating a power of attorney can help a principal set up crucial safeguards. However, it also makes room for financial and legal chaos. Having a POA means granting another person authority to act legally on your behalf. With the powers given to the agent, they can change financial beneficiaries, increasing the danger of self-dealing, theft, and fiduciary wrongdoing.
Drafting a POA should not be something you do independently. Engage the services of skilled and experienced lawyers to guide you on the dos and don’ts. Our San Antonio family law and estate planning firm, the Laura D. Heard Law Firm, can work with you. Contact us today for top-notch legal advice.