A Power of Attorney (POA) is an essential tool for your estate plans, and a mighty strong one at that. In effect, every adult should have one. Like most legal tools, the POA can be tailored to fit nearly every need. In some ways it is like the Leatherman Multi-Tool, stron, durable, effective and powerful when used correctly. But much like the Leatherman a "cheap knockoff" POA can do more damage than good.
The broadest POA is the “General Durable POA.” This gives the agent you appoint authority to do nearly every legal and financial act you can do for yourself, even when you are incapacitated. That is broad authority. In the wrong hands, it can be more than dangerous. Think of it as “legal dynamite.” In the right hands, it can be a blessing to you – and your loved ones.
On the other hand, it is possible to grant limited or specific POA authority. For example, you can limit the duration the POA is effective and even the specific acts you authorize. This can provide a degree of safety when you don’t want to grant open-ended authority.
Practically speaking, senior loved ones oftentimes have IRA accounts that need ongoing management and from which minimum required distributions must be taken. If these loved ones become infirm or develop cognitive issues, then their IRA accounts will need to be managed and administered for them. The Slott Report explored this legal and financial fact of life in a recent article titled “Using a Power of Attorney for an IRA.” One if the key take-a-ways from the article is that not all IRA custodians will treat various POAs the same.
In addition to appointing the right agent for your POA and selecting the right type of POA, be sure to confirm that your POA will be accepted by the third parties that will be asked to honor it. In this case, an ounce of prevention is worth more than a pound of cure.