Comparing Financial Powers of Attorney: Badly Drafted DIY vs. Well-Drafted Documents

Q. My husband is a handy DIYer, and it has saved us lots money, in many instances. Now, he is insisting on doing our Estate Planning documents, including our Wills and our Financial Powers of Attorney, on his own. I am glad he wants to take the initiative, but I am thinking that this is a bad idea. I would hate for something to go wrong and for banks not to accept it, or for the other horror stories I have read about to happen to us. He says if he can’t DIY it, he is going to find the least expensive attorney in town to do it for us, as he is convinced that POAs are always the same, no matter who does them. Can you back me up in saying that we should see a highly-experienced Estate Planning attorney for such things? Thanks for your help!

A. A Financial Power of Attorney is almost always the most important Estate Planning you will ever sign, as it is the document that avoids the nightmare of lifetime probate, also known as guardianship and conservatorship. A General Financial Power of Attorney, also called a Durable Power of Attorney, is done in connection with Estate Planning and/or Incapacity Planning. A General Power of Attorney is a document you sign that authorizes a designated person who you trust, called your agent or attorney-in-fact, to handle certain legal and financial matters for you should you become unable to handle your own legal and financial affairs due to incapacity, such as dementia or a stroke. If you are married, you typically name your spouse as your primary agent, followed by one or more trusted adult children as alternate agents.

Every adult should have a Power of Attorney drafted by an experienced Estate Planning attorney who is also an expert Elder Law attorney. Like most things in life, not all Power of Attorney documents are the same, and one that you prepare on your own or through a low-cost online document preparation service may not be worth the paper it’s written on.

What Makes a Good Power of Attorney?

A good Financial Power of Attorney provides 15 to 20 pages of comprehensive legal and financial powers to cover every possible situation, along with comprehensive asset protection powers, so that the person you name as your trusted agent can step in and work with an experienced Elder Law attorney to protect your assets from the devastating expenses of long-term care if and when necessary.

Should You Prepare Your Own Power of Attorney?

You or your spouse may think it’s a good idea to draft your own Power of Attorney or to hire an inexperienced and low-cost attorney to draft it. But being frugal while preparing the most important legal document in your life is generally not a smart move. Saving money may be good for DIY projects around the house if you have the time and skill to do it yourself and, even if you don’t already have the knowledge, there are hundreds of thousands of YouTube self-help videos to help you complete hundreds of common household tasks on your own. Learning to fix up things around your own home is a great skill that can be used many times during your life without any negative repercussions if you do these things well.

DIY Done Wrong Can Have Disastrous Consequences

However, there are many things that you should not do yourself. Here are just a couple of examples:

  • Most parents have at some point performed “dental surgery” by helping their children pull out a baby tooth that was already loose. As an adult, if you have a toothache, you can also do it yourself and act as your own dental surgeon. You could simply grab a pair of pliers from your toolbox and extract your own tooth instead of spending the money and time going to an expensive oral surgeon to perform the procedure. But adult teeth are firmly rooted in the jawbone, surrounded by nerves, blood vessels, and gums, so pulling them out incorrectly can of course cause permanent damage. Some of the many risks of pulling out your own tooth are: you can develop an infection that might lead to your brain; you could accidentally leave behind part of the tooth, which can then decay and cause further damage; you can cause jaw fracture, facial damage, nerve damage, and even facial collapse.
  • Most people like to go on vacation, but airline travel is getting more and more expensive. Why not get your pilot’s license and rent or buy your own plane to go on your next vacation? Some people do have a pilot’s license, and it only takes about 60 to 70 hours of instructional time to obtain a pilot’s license. But according to Zone Aviation, less than 1 percent of the US population has a private pilot certificate. After getting your private pilot’s license, why not go one step further and build your own airplane? You can purchase an airplane kit online and build your own airplane in the comfort of your own garage for approximately $50,000-$60,000. A mere 1,400 or so hours of work later, you should have a flying machine which can be inspected by the FAA and which you can use to take you and your family to almost any vacation destination you want. Aside from crashing and dying and killing your whole family, what could possibly go wrong?
  • Doing your own Estate Planning may not be as risky or deadly as yanking out your own tooth or trying to build and fly your own airplane, but it can be just as expensive after you die, or if you become incapacitated, if you did your own Estate Planning incorrectly. And doing it incorrectly is very common. There is a reason that attorneys must graduate college, attend three years of law school, and pass at least one state bar exam. There is a reason that it takes at least 5 years to even sit for the test to become a Certified Elder Law Attorney, and there’s a reason that there are only about 525 Certified Elder Law Attorneys in the entire country. The reason, of course, is that law is a very complex field, and Elder Law, especially anything to do with Medicaid, is the most complex field of law in existence.

DIY Estate Planning

Doing things for yourself in the area of Estate Planning, such as Powers of Attorney, Wills, and Trusts, is never a good idea. The best way to have a Power of Attorney prepared the right way is to hire an experienced Estate Planning lawyer who is also an experienced Elder Law attorney, to develop a well-drafted and comprehensive Power of Attorney with unlimited gifting language, the ability to create irrevocable trusts, and the ability to do comprehensive Medicaid planning should you wind up needing nursing home level care in the future.

DIY Power of Attorneys Are a Bad Idea

It is of course true that you can find low-cost do-it-yourself POAs on sites such as Legal Zoom and Rocket Lawyer  (affectionately called Legal Doom and Rocket Liar by many Estate Planning attorneys who have the pleasure of charging often tens of thousands of dollars to clean up mistakes made by people who use these online document factories). But it is also true that, as in many areas in life, you get what you pay for! It’s certainly not worth the headache you and your loved ones will be facing later to save money DIYing when it comes to your POA or any Estate Planning document. Here’s why:

  • DIY documents tend to take a one-size-fits-all approach. That often creates many problems when it comes time for your agent to act on your behalf. Your agent’s power will often be challenged because the wording in the DIY POA document is unclear, insufficient, or not explicit.
  • You should never assume that your Agent under POA will be allowed to do something for you unless that power is specifically spelled out in the power of attorney document. If you’re not specific enough about what legal and financial affairs your agent should be able to handle and under what circumstances, it can lead to many headaches later on, such as a financial institution being unwilling to accept the DIY power of attorney, often forcing your family to hire an attorney to go to court to have you declared incompetent and to have a guardian and conservator appointed to manage your legal and financial affairs, thus beginning the expensive nightmare process of lifetime probate.
  • You may not understand the scope of powers you’re giving, or the limitations you’re placing, with a DIY power of attorney document. An experienced Estate Planning attorney can help pinpoint what is best for your situation — which powers should be granted and which powers should not be granted.
  • A DIY power of attorney document often does not include essential asset protection powers that many people need in order to allow their trusted loved ones to hire an experienced Elder Law attorney to do Medicaid asset protection planning in the future.
  • On the flip side of this issue, a DIY power of attorney may not include sufficient safeguards to protect you from exploitation, especially if you don’t have a trusted spouse or trusted adult children. See today’s Critter Corner article for more details.
    • An experienced Elder Law attorney will be familiar with the precautions that need to be taken and wording that should be included in the document to protect you from being exploited.
  • DIY power of attorney documents often do not conform to your state’s law, or worse yet are drafted pursuant to the laws of another state. We have seen many dozens of power of attorney documents over the years that are titled “Virginia Power of Attorney” or “Maryland Power of Attorney” or “ District of Columbia Power of Attorney” but are actually written under the laws of another state, often California because that is where many of the online legal document factories are headquartered. These supposedly state-specific documents have blatant and glaring references to California state law, or the law of another random state that have no relevance to your situation. State rules vary about what steps need to be taken to make the document legally binding and able to work for all situations. For example, the District of Columbia has special language that must appear at the top of every power of attorney document in order to allow your agent to exercise powers with respect to your real estate.
  • Many sign a DIY power of attorney document and never update it. This is also a problem with a well-drafted power of attorney done by an Estate Planning attorney and/or Elder Law attorney.
    • A POA is a legal document you want to review regularly because it can give your agent a lot of control that you may no longer want to grant if that person is now your ex or an estranged child, for example. Relationships and family dynamics often change over time. Circumstances such as where you live may change. Your wishes may change at any time. Laws may change from year to year. Your power of attorney document and all of your Estate Planning and Incapacity Planning documents should be updated when there’s a major life event, such as when you get divorced, you get married or remarried, or when someone mentioned in any of your documents dies. It’s important to review your financial power of attorney frequently, even every year. Some banks question and may not accept a power of attorney that is more than one year old. For more details on banks and POAs, read my article “Top Five Reasons Banks Won’t Accept a Power of Attorney and What You Can Do About It”

Count on the Farr Law Firm for a Well-Drafted Power of Attorney

At the Farr Law Firm, our Financial Power of Attorney is an essential part of every Incapacity Plan and Estate Plan. Our power of attorney:

  • is always “durable” when used in connection with estate planning;
  • authorizes your agent to act on your behalf in all appropriate legal and financial matters;
  • is an essential tool in the event that, due to age, illness, or injury, you are unable to carry on your legal and financial affairs;
  • will avoid the “nightmare of living probate” — the time-consuming, expensive, and publicly embarrassing process whereby someone has to go to court to have you declared mentally or physically incompetent as part of a guardianship and conservatorship proceeding;
  • usually (when appropriate) includes comprehensive asset protection powers, such as the ability of your agent to make unlimited gifts and the ability of your agent to establish, fund, and terminate all types of trusts, both revocable and irrevocable.
    • These asset protection powers can be essential for implementing important asset protection strategies if you become disabled or need long-term nursing home care and want to avoid having to go broke paying for nursing home care.
    • Most Power of Attorney “forms” that you will find on the internet or obtain as part of your basic estate planning done by an Estate Planning attorney or general practice attorney do NOT contain these vital asset protection powers. Typically, these essential asset protection powers are provided only if you have your Power of Attorney prepared by an experienced Elder Law Attorney, preferably a Certified Elder Law Attorney.

It is important to understand that not all Power of Attorney documents are the same, as there are no “standard” forms.  A Power of Attorney can and should be customized for every individual based on that individual’s specific desires and life circumstances. In addition, state laws vary regarding the use and acceptance of a power of attorney, and most financial institutions have their own rules about Powers of Attorney.

An experienced Elder Law attorney, such as the attorneys at the Farr Law Firm, can draft a power of attorney document that is specific to your needs and your state’s law while ensuring that all of the proper steps are taken to make your power of attorney effective and tailored for you.

Why Every Adult Needs a Power of Attorney

You never know what might happen to you or when it might happen. That’s why every adult should have both a financial general durable power of attorney and an advance medical directive in place. Signing these Estate Planning and Incapacity Planning documents is an integral part of any good estate planning.

Powers of attorney and advance medical directives offer the peace of mind that someone you appoint can step in if and when needed to handle your legal and financial affairs and health care decisions. If you have not done Incapacity Planning or Estate Planning, or if you have a loved one who has not done it, the time to plan is now. You can count on the Estate Planning attorneys, Elder Law attorneys, Medicaid asset protection experts, nursing home planning experts, and long-term care planning advisors at the Farr Law Firm!

Please contact us at any time to make an appointment:

Power of Attorney Lawyer Fairfax: 703-691-1888
Power of Attorney Lawyer Fredericksburg: 540-479-1435
Power of Attorney Lawyer Rockville: 301-519-8041
Power of Attorney Lawyer DC: 202-587-2797

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About Evan H Farr, CELA, CAP

Evan H. Farr is a 4-time Best-Selling author in the field of Elder Law and Estate Planning. In addition to being one of approximately 500 Certified Elder Law Attorneys in the Country, Evan is one of approximately 100 members of the Council of Advanced Practitioners of the National Academy of Elder Law Attorneys and is a Charter Member of the Academy of Special Needs Planners.