Common Mistakes and How to Avoid Them
While a Power of Attorney is a powerful tool, mistakes in its creation or execution can render it ineffective or, worse, create unintended problems. Being aware of these common pitfalls can help you navigate the process more effectively.
Mistake 1: Waiting Too Long
This is the most common and most tragic mistake. A Power of Attorney must be signed while the principal is mentally competent. If you wait until a parent has advanced dementia or is unconscious after an accident, it is too late. At that point, the only option is a court-supervised guardianship, which is exactly the outcome a POA is designed to prevent.
How to Avoid It: Treat creating a POA like buying insurance. You put it in place hoping you’ll never need it, but you do it long before the crisis hits. Have these conversations with your family and create the documents while you are healthy.
Mistake 2: Choosing the Wrong Agent
Appointing an agent is a matter of trust and capability, not tradition or fairness. Naming your oldest child out of obligation, or naming all your children as co-agents to avoid hurting anyone’s feelings, can lead to disaster. An agent who is not financially responsible could mismanage your funds. Co-agents who disagree on a course of action can become deadlocked, unable to act at all.
How to Avoid It: Choose your agent based on who is best suited for the job. If you do appoint co-agents, your document should clearly state whether they can act independently or must act together. It is often simpler and more effective to name one primary agent and then one or two successors in a clear line of succession.
Mistake 3: Using a Vague or Poorly Drafted Document
A document that isn’t specific enough can be easily rejected. Banks and financial institutions are very cautious about liability. If your POA doesn’t explicitly grant the specific power your agent is trying to use (like the power to make gifts or change beneficiary designations), the institution may refuse to honor it. Conversely, a document that is too broad without any checks and balances can open the door to abuse.
How to Avoid It: This is where an attorney’s help is invaluable. They know the specific language that financial institutions look for and can draft the document to be both powerful enough to be effective and tailored enough to reflect your wishes. For example, you can require your agent to provide an annual accounting of their actions to your other children or to a trusted professional.
Mistake 4: Not Naming a Successor Agent
Life is unpredictable. Your carefully chosen primary agent could pass away, become ill themselves, or move across the world. If you haven’t named a backup, your POA becomes useless, and your family is back to square one: facing a potential court proceeding.
How to Avoid It: Always name at least one successor agent. A second successor is even better. Make sure you have the same frank conversation with your successors as you did with your primary agent to ensure they are willing and able to serve if called upon.
Mistake 5: Not Planning for State-Specific Laws
You may live in Texas, but your child (and agent) lives in California, and you own a vacation home in Florida. Power of Attorney laws vary significantly from state to state. A document that is perfectly valid in Texas might be missing a witness requirement for Florida or use language that a California bank finds unfamiliar. This can cause delays and rejection.
How to Avoid It: Work with an attorney who is licensed in the state where you primarily reside. If you own property in other states, discuss this with them. They can ensure the document is drafted to be as widely accepted as possible.
Mistake 6: The Agent Misunderstanding Their Role
An agent’s power is not a blank check. They are not the owner of the principal’s money; they are the steward. Any action taken must be for the sole benefit of the principal. An agent who “borrows” money from the principal’s account or uses it to pay their own bills is committing a breach of their fiduciary duty and may be subject to civil and criminal penalties.
How to Avoid It: The principal should have a clear conversation with the agent about their duties and expectations. The POA document itself should be clear about the agent’s responsibilities. Putting a requirement for regular accountings in the document can also act as a powerful deterrent against mismanagement or abuse.
