Navigating California Powers of Attorney: Understanding the Power and the Perils

Types of California Powers of Attorney:

California recognizes several POA variations, each tailored to specific situations:

• Durable General Financial Power of Attorney: This grants broad authority for your agent to handle your finances, including managing bank accounts, paying bills, selling property, and filing taxes. Importantly, “durable” means the POA remains valid even if you become incapacitated.
• Limited Power of Attorney: This restricts your agent’s power to specific tasks, like selling a particular car or managing a rental property.
• Springing Power of Attorney: This POA takes effect only upon the occurrence of a specific event, such as your incapacitation due to illness.
• Advance Health Care Directive (AHCD): This type of power of attorney for healthcare allows your agent to make medical decisions if you are unable to do so.

Choosing the Right POA:

Selecting the appropriate POA depends on your needs and goals. A general POA offers comprehensive control and powers, while a limited POA suits specific situations. A springing POA provides peace of mind, knowing someone can manage your affairs if needed, and an AHCD ensures your healthcare wishes are respected.

Key Considerations When Creating California Powers of Attorney

• Mental Capacity: Both you (the principal) and your agent must have the mental capacity to understand the POA’s implications when signing.
• Agent Selection: Choose someone you trust to carry out your wishes/intentions with good judgment and financial intelligence. It is recommended that you discuss your expectations and wishes openly. Ideally, you will also name a successor agent in case your primary agent becomes unavailable or unwilling to serve.
• POA Formalities: California requires certain formalities to be followed in order to grant power to an agent to make decisions on your behalf. The power of attorney needs to be witnessed by a notary public or two competent adults. We recommend always having a financial power of attorney notarized in order to ensure its acceptance by all account holders the agent may need to deal with in transacting on your behalf.

Understanding Your Rights and Responsibilities:

• Principal’s Rights: You retain the right to revoke your POA anytime as long as you have mental capacity. It is wise to keep a copy of the original POA and revocation document readily accessible.
• Agent’s Duties: Your agent has a legal and ethical obligation to act in your best interests and keep accurate records of their actions. They cannot use the POA for personal gain or make decisions against your expressed wishes.

Safeguarding Against Misuse

While POAs offer tremendous benefits, potential risks exist:

• Elder Abuse: Sadly, some individuals may exploit a vulnerable principal by misusing the POA for personal gain.
• Financial Mismanagement: An unscrupulous agent could mishandle your finances, leading to significant financial losses.

Here are some tips to mitigate these risks:

• Conduct thorough background checks on your chosen agent.
• Clearly define the scope of authority in the POA document. This is important, especially when considering powers to grant your agent. For example, if you would like someone to be able to amend your trust or create one on your behalf unless the power is specifically and explicitly spelled out, your agent will not have the power to do so.
• Consider limitations, like requiring two signatures for significant transactions.
• Regularly review financial statements and communicate with your agent.
• Consult with an attorney specializing in estate planning for personalized guidance.

Conclusion

A California power of attorney can be a powerful and valuable tool for managing your affairs and ensuring your wishes are respected. However, careful consideration and planning are crucial. By understanding the different POA types, selecting a trustworthy agent, and taking steps to safeguard against misuse, you can empower someone to act on your behalf with confidence. Remember, consulting with an attorney experienced in estate planning can provide valuable insights and ensure your POA is tailored to your specific needs and circumstances. At Law Stein Anderson, LLP, we offer sound counsel to our clients to assist in creating and protecting wealth. Our partners and associates are well-versed in all areas of estate planning and are here to provide proper advice and counsel in your estate and tax planning endeavors.

Read the newsletter by Nathan R. Loftin, Esq.

Contact Law Stein Anderson to further discuss California Powers of Attorney.