Disadvantages Of Being A Power Of Attorney

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Disadvantages Of Being A Power Of Attorney - Risks Of Being Power Of Attorney - Power Of Attorney Responsibilities And Liabilities

What are the disadvantages of being a power of attorney? 

If someone has asked you to be a power of attorney, you probably are interested in:

  • the risks of being power of attorney
  • the disadvantages of being a power of attorney
  • the power of attorney responsibilities and liabilities
  • is the power of attorney responsible for debt
  • is a power of attorney responsible for medical bills
  • if you have power of attorney, can you be held liable

So, keep on reading. 

You don’t want to wrongfully lose assets that are rightfully yours. You also don’t want to risk being sued by creditors. You need an experienced power of attorney lawyer who can set up your POA properly.

 If you want to protect your rights, not wrongfully lose assets, and not get sued by creditors, fill out the form below

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Disadvantages Of Being A Power Of Attorney

There are some risks of being a power of attorney

And disadvantages of getting a power of attorney. 

Some disadvantages of getting a power of attorney are that:

  • the principal’s mental capacity at signing can be questioned
  • some banks don’t accept a power of attorney
  • incorrectly created POAs won’t give the agent the authority they need to make decisions
  • the agent can abuse their powers if the instructions are too broad
  • the principal could be a victim of elder abuse or fraud
  • there is no oversight of the POA’s actions
  • without a durable POA, no one can make decisions for you if you’re incapacitated
  • without a healthcare directive, a POA cannot make medical decisions for you

But the biggest disadvantage of a power of attorney is the financial risks. 

A general power of attorney can:

  • withdraw money from retirement funds
  • withdraw money from bank accounts
  • sell property on your behalf
  • sell your house
  • go into debt on your behalf
  • enter contracts on your behalf

If you don’t know and trust the person, you should not use them as a power of attorney.

A disadvantage of a power of attorney is that they have the authority to mess up your life. 

You need someone who will act in your best interest. 

We will cover the risks of being a power of attorney for someone down below. 

Related: Can You Have More Than One Power Of Attorney

What Does A Power Of Attorney Do

A power of attorney gives someone the authority to act on your behalf. 

Depending on the type of power of attorney, it allows someone to make decisions about:

  • finances
  • medical care
  • property

A power of attorney has the fiduciary responsibility to act in the principal’s best interests. 

The POA is responsible for managing some or all of the principal’s affairs.

Related: What Happens If A Will Is Not Probated

Power Of Attorney Responsibilities And Liabilities

Let’s talk about the power of attorney responsibilities and liabilities.

The responsibilities of a power of attorney depend on what type of power of attorney you have. 

The types of power of attorneys are:

  • general power of attorney
  • financial power of attorney
  • a healthcare power of attorney
  • a durable power of attorney

A general power of attorney‘s responsibilities are:

  • buying life insurance
  • performing business transactions
  • handling financial transactions
  • buying or selling real estate
  • making gifts for tax planning
  • operating a business
  • settling claims

A healthcare power of attorney’s responsibilities are making decisions about:

  • choosing a doctor or care provider
  • figuring out long term living arrangements
  • hiring in-home caregivers
  • surgeries
  • medications

Related: Can An Executor Override A Beneficiary

Am I Responsible For My Parent's Debt If I Have Power Of Attorney?

You are not responsible for your parent’s debt if you have power of attorney. 

A power of attorney will be responsible for paying for their parent’s debts. 

But you pay for your parent’s debts with your parent’s money. 

You will not be personally liable for your parent’s debts if you have power of attorney. 

Related: Executor Not Communicating With Beneficiaries

Is Power Of Attorney Responsible For Medical Bills?

A power of attorney is not responsible for medical bills. 

While they have power of attorney, they are responsible for paying for medical bills. 

But the POA uses the principal’s funds to pay for medical bills. 

The POA is just responsible for managing those funds and paying those medical bills. 

Related: Consequences Of Not Probating A Will

Is The Power Of Attorney Responsible For Debt?

A power of attorney is not responsible for debt that the principal had before they became POA.

And they won’t be responsible for debts accrued after they received power of attorney. 

But there is a possibility that a power of attorney can be responsible for debts. 

If a power of attorney co-signs on a loan, they are responsible for those debts. 

This is not one of the disadvantages of being a power of attorney. 

Because it can happen whether you’re a POA of not. 

Related: Power Of Attorney vs Guardianship

Risks Of Being Power Of Attorney

Let’s discuss the risks of being a power of attorney for someone else. 

When you are someone’s power of attorney, you have a fiduciary responsibility

This means that you must act in a way that benefits the principal.

If you breach the fiduciary duties, the principal can be entitled to damages

Meaning you could be sued if you don’t act in the best interests of the principal.  

Most power of attorneys can buy real estate, take on debt, and sign contracts. 

You can legally obligate the principal to any contract or agreement. 

Even without taking on any personal, legal, or financial liability. 

But there are risks of being power of attorney under certain conditions, such as:

  • signing additional agreements that make you financially liable
  • relationship liability that has nothing to do with your power of attorney
  • handling the principal’s affairs illegally, negligibly, or fraudulently 
  • act in a way that you are not authorized to do so

Let’s cover these disadvantages of being a power of attorney more in-depth. 

Related: Do Wills Have To Be Probated

If I Have Power Of Attorney Can I Be Held Liable?

If you have power of attorney you cannot be held liable for debts accrued before you became a POA.

One of the disadvantages of being a power of attorney is that you may become financially liable. 

But after you become a power of attorney, you can be held liable for financial decisions. 

You can be held liable for the principal’s debt if you:

A power of attorney cannot be held liable for financial obligations outside of their control. 

But one of the risks of being a power of attorney is that you can be held liable for debts. 

Related: Do You Need Guardianship If You Have Power Of Attorney

Mismanaging Property With A Power Of Attorney

Another disadvantage of being a power of attorney is that they can financially ruin you. 

This is true whether:

  • you are the power of attorney for someone
  • someone is a power of attorney for you

And this doesn’t only apply to power of attorneys stealing from you

Mismanagement can be someone who just doesn’t know what to do with your property. 

A power of attorney can:

  • sell property at a loss
  • mismanage a business into the ground
  • seem to steal or embezzle money

These events can happen accidentally or unintentionally.  

You need to choose a power of attorney carefully. 

So that you can reduce the risks of a power of attorney. 

But there are people who use their power of attorney to:

  • funnel money to themselves
  • drain the principal’s savings and investments
  • not pay debts, leading to defaults and ruined credit
  • buying properties and co-signing
  • entering contracts with your name that benefits them

In these instances, they are breaking the law. 

But the authorities can’t take action if they are unaware of the illegal activities. 

If no one is checking on what the power of attorney is doing, they can get away with a lot. 

Related: Can The Executor Of A Will Take Everything

How To Get Power Of Attorney

If you want a reliable, attorney-created power of attorney, fill out the form below.

Our experienced attorneys will create your power of attorney, which means:

  • you can make sure your POA abides by the laws
  • you have confidence you have the correct power of attorney set up
  • you don’t have to hire a notary to show up to the signing
  • you don’t have to find witnesses to show up at the signing
  • you get FREE revisions for 30 days

Fill out the form below and we will reach out and get the ball rolling.

Talk soon.

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