When you create a financial power of attorney, you try to anticipate all the situations that might happen at any point down the road. A standard power of attorney usually contains some general powers, or the document would be pointless.
This article will discuss some of the powerful provisions in your financial power of attorney. You will want to work with a Texas estate planning attorney to craft a financial power of attorney that meets your needs and goals. A financial power of attorney designates someone else, called your agent, to handle your financial affairs if you are unable to do so.
The Authority to Change the Terms of Your Estate Plan
Face it, life happens. Things can happen that you might not have anticipated when you drafted your financial power of attorney. Let’s say that you have a durable power of attorney that names the person you want to manage your assets if you become incapacitated. Sadly, after a severe car crash, your wounds leave you unable to make financial decisions, understand the consequences of economic actions, or communicate your decisions.
When you wrote your estate plan, you might not have expected that one of your children would develop a disease that makes them unable to support themselves through gainful employment and in need of additional resources. If your financial power of attorney gives your agent the power to make or change your estate plan, they could create a special needs trust or make some other change in the best interest of your child. You would have likely taken the same action had you not been incapacitated
The Authority to Gift
You might have signed a durable financial power of attorney but not created a will or a living trust that disposes of all of your assets one day when you pass on. Even if you have a will or trust, those legal papers can only distribute assets that you still have at the time of your death, regardless of how much you had when you became incapacitated.
Giving your agent the power to gift allows the agent to, for example, continue your charitable habits that you have practiced throughout your life, like gifts to your church or a scholarship fund.
You will want to place some reasonable restrictions on the power to gift, like requiring an independent party to approve of all gifts the agent wants to make on your behalf. The power to gift, if left unfettered, could empower the agent to “give” a substantial portion of your assets to the agent. You might want to include language that does not allow the agent to disrupt your estate plan’s essential provisions.
The Authority to Prosecute and Defend Legal Actions
A provision empowering the agent to prosecute and defend legal actions is powerful, but it can get misused. You want to allow the agent to participate in legal actions so that they can protect you and your estate, but you do not want the agent to use this authority inappropriately because of a personal vendetta. For example, it can be a good thing if your agent has the authority to take legal action against a financial advisor if they embezzled from your securities account. It is not a good thing, however, if your agent, an adult child from your first marriage, misuses the authority to prosecute legal actions by making your children from a later marriage miserable. It could be a good idea to talk with a Texas estate planning attorney about the goals you wish to accomplish and the problems you want to avoid with your financial power of attorney. Contact our office today for legal help with your case, we offer a free consultation.