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Power of Attorney Mistakes to Avoid Making

Power of Attorney

Power of Attorney Mistakes

A Power of Attorney (POA) can be one of the most powerful estate planning documents you create, providing someone you trust with the authority to make decisions on your behalf. In Indiana, as in many states, a properly executed POA allows you to appoint an Agent to step in and manage your financial, legal, or healthcare matters if you are unable to do so yourself. This can help avoid delays and the need for a court-appointed guardian, especially in cases of sudden illness or incapacity. Unfortunately, despite its benefits, a POA can also lead to complications if not drafted or used appropriately. The Indianapolis attorneys at Frank & Kraft explain common mistakes that individuals often make when creating or using a Power of Attorney.

  • Lack of Oversight: Many POAs provide sweeping powers to the Agent but lack any built-in checks. This can create opportunities for misuse or abuse, especially if the Agent has unrestricted access to financial accounts or legal documents. In Indiana, you may include provisions in the POA that require the Agent to provide periodic reports to a third party or to act in conjunction with another Agent. These types of oversight can discourage misconduct and help ensure that decisions are made in your best interest.
  • Vague Authority: One of the most common missteps is failing to clearly define the Agent’s authority. Ambiguity in the document can cause confusion for banks, doctors, or other third parties. If the POA does not specify which actions the Agent is allowed to take, such as selling property, accessing bank accounts, or making healthcare decisions, these entities may hesitate or refuse to honor the Agent’s requests. Family members may also disagree about the extent of the Agent’s powers, which could lead to delays or even court involvement. A detailed and unambiguous POA helps ensure that your wishes are understood and carried out without unnecessary friction.
  • Durability: The use of a Durable POA, which continues to be effective after the Principal becomes incapacitated, can be a valuable planning tool. Yet, it also comes with certain risks. If you recover from an illness but the Agent continues to act on your behalf, disagreements may arise over the extent of their ongoing authority. To avoid confusion, your POA should include clear language stating when the Agent’s authority begins and ends. Some individuals choose to use a “springing” POA that only becomes effective upon a specific event, such as a doctor certifying incapacity.
  • Wrong Agent: Another frequent error is choosing the wrong individual to serve as your Agent. It may be tempting to name a close friend or family member, but this should not be a decision based solely on familiarity or convenience. Your Agent will be entrusted with a high level of responsibility, so it is critical to select someone who is reliable, capable, and organized. Poor judgment, lack of experience, or personal financial issues can lead to mismanagement. Worse yet, a dishonest Agent might misuse your assets for their own benefit. It is essential to evaluate whether your chosen Agent is truly up to the task.
  • Exploitation: Exploitation is another significant concern, especially for elderly individuals or those with declining mental faculties. Unscrupulous individuals may manipulate or pressure someone into signing a POA that grants them control over financial or legal matters. Once that authority is granted, they might drain bank accounts, transfer property, or make decisions that do not reflect the Principal’s wishes. Detecting this kind of abuse can be difficult, and once it is uncovered, the financial damage may already be substantial. Protective measures such as witness signatures, notarization, and notifying trusted individuals can help reduce the risk of fraud.
  • Failing to Update: Many people forget to revoke or update their POA after major life changes. If you create a new POA without formally revoking the old one, there could be confusion if two different individuals try to act as your Agent. In addition, financial institutions may hesitate to accept an older POA, fearing it may no longer reflect your current wishes. Indiana law generally supports the use of validly executed POAs, but outdated documents can still cause complications. To avoid problems, you should periodically review your POA and make updates when necessary. Always put revocations in writing and provide copies to anyone who may be affected.
  • Neglect: Even well-meaning Agents can cause harm if they are unfamiliar with their legal duties. For example, an Agent who neglects to file taxes, pay bills, or maintain proper records could expose you to financial penalties or legal liability. If the Agent makes questionable investment decisions or engages in transactions that raise red flags, both the Principal and the Agent could face consequences. It is vital to choose an Agent who understands the importance of the role and is willing to seek professional advice if needed.

Can We Help You Avoid Making Common Power of Attorney Mistakes?

For more information, please join us for an upcoming FREE seminar. If you would like assistance to avoid making common Power of Attorney mistakes, contact the experienced Indianapolis estate planning attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.

Paul A. Kraft, Estate Planning Attorney
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