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Wednesday, April 20, 2011

Why your power of attorney document should spell it all out

There are some legal documents that are really only used by lawyers and judges during a court case. There are some that are used only by business people during specific transactions. And then there are the documents that are used almost exclusively by lay people, such as Enduring Power of Attorney (also called continuing or durable power of attorney, or power of attorney for property). Few documents match the power of attorney for the sheer number of users who don't have any idea what the document allows them to do.

I believe that power of attorney documents should spell out the basics. Why assume that the person who has no legal training and has never used this type of document before is going to understand the law behind it and the subtleties of the language? It's not easy to navigate your way with no guidance. The document should give more help than it usually does.

A power of attorney document should spell out the rights and restrictions that exist. For example, it should echo the language of the law that created it by saying that the power of attorney document is only to be used for the benefit of the donor (the person who signed it) and the donor's dependents.

It should let the person acting under the power of attorney know that there are rules he or she might not know about. For example, the law of powers of attorney says that the attorney may not give away the donor's money. Does the attorney know that? Do they realize that "giving money away" includes gifts to charities and birthday presents for family members? In my experience, many attorneys trying to manage affairs for their parents would have done a much better job had they been alerted to some of the operating restrictions.

The language used in powers of attorney may be misleading if these extra clauses are not included. Most documents say that the attorney is not subject to any restrictions. To be more accurate, the documents should say that the attorney "is not subject to any restrictions other than those that are already in place by law".  Your average person who sees "no restrictions" is going to find it hard to believe that they can't give to charities, give cash gifts the way Mom used to, or share out an inheritance early.

The document should go even further, and spell out what happens if the attorney gives into greed. Let them know what the consequences are. For example, say that if the person acting as attorney under the document is found to have broken the rules or committed a fraud, that person is to be removed immediately and replaced by someone else.  And if the person is a beneficiary under the donor's estate, the attorney who committed the fraud is to lose his or her share of the estate.

Let's try to remember that almost every lay person acting as attorney under a power of attorney is carrying on without the benefit of a lawyer translating every clause in the document on a daily basis. The documents should be designed with this in mind, and should not be set up so that only those with a background in law can use them without making mistakes.

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