How Granting Power of Attorney Can Protect You
Monday, June 04, 2012
What if you are rear ended while driving to work one morning. Its a terrible accident, you suffer some significant head trauma and you are placed into a medically induced coma until your condition stabilizes. It's fair to say that most people in that situation will put their health first and worry about the bills, the mortgage and student loan payments when they can. The reality is while you may feel that way, your creditors may not.
Another common development in life is when a person begins to get older they may lose interest in day to day banking decisions or may not want to be involved in the sale of a family home for emotional reasons. What is also possible, depending on your lifestyle, is a period of incarceration. It's fair to say that you will not have the same opportunity to access your online banking account while sitting in State Prison.
One way to prepare for strange turns in life is to sign what is called a Durable Power of Attorney. Essentially, you fill out a properly drafted form that gives someone the power to make legal and business decisions for you in the event you are no longer able to do those things for yourself. Two things you should keep in mind when giving someone this power: a) you should trust this person to make good decisions for your benefit; and b) if that person fails to make good decisions, there are ways to hold them accountable.
The Massachusetts Uniform Probate Code, effective March 31, 2012, includes definitions as well as helpful commentary on Powers of Attorney. There are, however, a few important decisions you need to make when creating the effective document that cannot be effectively laid out in this article. The truth is that each person's case is unique and you need to get good advice from someone who knows the facts of your case and the law. Speaking with a Lawyer practicing in this field will provide you with the guidance you need.
Once you speak with a Lawyer, the appropriate forms will be generated. Those forms lay out who you are, who your designated party is and how long the designated party will have the powers described. Another good reason to execute these forms now, assuming you are mentally healthy, is that in order to assign these powers you have to be competent.
When a person is granted a Power of Attorney over your affairs that permits them to bind you in contracts, engage in day to day decision making over finances as well as filing lawsuits and collecting debts. Like the old saying goes, however, with great power comes great responsibility. By accepting this Power of Attorney, this individual has become your agent in fact and has certain fiduciary duties to you. This is a very old concept in our common law and boils down to the idea that if I trust you, you better do right.
Basic fiduciary duties include the duty of utmost good faith and absolute loyalty. What this means is that, absent language to the contrary in the Power of Attorney document, your agent must act for your benefit in all matters relating to this power, even if that means those actions are to the detriment of the agent. In addition, this includes an agent's obligation to avoid self-dealing. What that means is that, unless the Power of Attorney document indicates otherwise, your agent must refrain from using their powers to conduct transactions that ultimately benefit themselves instead of just you. If your agent fails to meet these or any of the other fiduciary duties, the consequences to them can range from monetary damages to criminal prosecutions.
As I mentioned before, each case is different and the challenges you face can be addressed by the right Lawyer with the correctly drafted documents. What should be remembered is that taking the time now to identify who will be responsible for your affairs if you can't be, as well as identifying what they will be responsible for, can help you prepare for the unexpected, whether that is a short term medical condition or a long term disability.
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