Whom to appoint should be an area of focus for physicians with significant accumulated wealth as they plan their estates.
When physicians work with professionals on estate planning, powers of attorney (POA) are often viewed as an afterthought, to be addressed only after the will and trust documents completed.
When attention is finally turned to POAs, the issue of whom to appoint as agent — the person who receives power of attorney — usually gets short shrift. These agents take over your affairs in specific areas if you become physically or mentally incapacitated. Whom to appoint should be an area of focus for physicians with significant accumulated wealth as they plan their estates.
Choosing the wrong person to act as agent for a financial POA can set the stage for unintended consequences that might result in disastrous outcomes, hazardous to your health and your wealth.
If both of these POAs are held by the same person, there’s potential for a cornucopia of conflicts. And if that same individual is also a beneficiary in your will, the conflict-potential level could rise to DEFCON 1.
Conflicts can result in agents serving themselves instead of you, so agents should be selected with great care and not entrusted with more than one POA. Ideally, this person shouldn’t be a beneficiary, though avoiding this dual status can be difficult when the natural inclination is to make one’s spouse the agent of both POAs, which is quite common.
But whether this is a good idea may come down to knowing how good and truly loving your marriage is or, if you’re not married, how solid your relationship. It’s a good idea to ask yourself: How well do you know this person and how long have you known him or her?
At the very least, if you appoint the wrong person as agent for your financial POA, incompetence can hamstring investment gains and erode assets. In a worst-case scenario, a self-dealing agent can change beneficiaries (making himself or herself one) or redirect portfolio income to themselves. But these actions are legal only if POA documents allow it. This is one of many reasons that these documents should be carefully considered and drafted.
Even when agents are well intentioned, poor decisions can be made, so it’s critical to have highly competent people make financial and medical choices on your behalf.
Designating the right person(s) as agents is only part of assuring desirable financial and medical stewardship. The other important part is crafting POA documents correctly to delegate the right powers, conditioned on specific circumstances, in accordance with your wishes.
Failing to read POA documents carefully—or to make changes to limit agents’ power—could be an especially detrimental lapse when the presumed agent brings the documents to you on their own initiative. If the documents come to you out of the blue, with no prior discussion, this should get your antenna up. When people sign POAs without carefully reading and considering their provisions — or without involving a qualified attorney — they’re oblivious to the poor position they may be putting themselves in.
When discussing agent candidates with your attorney or estate planner, you might want to consider:
Designating different grown children as agents for financial and health care POA.
If you have doubts about the ability of spouse or significant to serve as your POA agent, this could be a better option.
A single POA doesn’t have to be held by a single person. You could have two agents working together to execute one POA. The usual trust threshold applies, but the two also must be able to work together.
Keeping agents separate.
The surefire way to avoid conflicts that can ensue from one person’s having both financial and health care POA is simply to not give both to the same individual. These duties should be assigned to two different people.
David Robinson, CFP, is an advisor with Mariner Wealth Advisors in Phoenix.