If you're reading this and you have probably been a client of ours or you've had any personal experience with powers of attorney with other people that you know, then you know that the power of attorney document is one that allows for a third party to make financial decisions and transactions on your behalf if you're ever unable.

However, there are a lot of things about power of attorney documents that will surprise people, and we want to highlight them for you here.

I know that there's a lot of verbiage that flies around out there in the ethos. However, power of attorney is the name of the document. Attorney in fact is the name of the person. When you're reading your power of attorney document, you'll see all these references to “my attorney”, but don't worry, they're not talking about me. They’re talking about the person that you've chosen to act on your behalf, which is probably your spouse, an adult child or a trusted friend.

A lot of people are really familiar with the statutory short form power of attorney, which is the one that you can find and print off the internet.

The Attorney general for the State of Minnesota publishes a statutory short form power of attorney form, and it's also found in the Minnesota statutes on the reviser's website. However, that is only one of the types of power of attorney documents that exists.

There is also a common law power of attorney that is becoming more commonly used by attorneys and those in the legal profession. The reason being there's a little bit of difference and nuance between the two documents and what you can accomplish with each one.

The reason statutory short form powers of attorney are so widely recognized is because the document, having been published on the reviser's website and on the attorney general's website, means that a lot of banks, financial institutions, and investment professionals have at least seen this somewhere before. The familiarity probably makes most people feel more comfortable when they're presented with the statutory short form power of attorney document, and they will accept it more readily than they may accept the common law power of attorney document.

Even though in the paragraph above, I just told you that the statutory short form power of attorney is more commonly recognized and widely accepted than other forms of power of attorney, there are a lot of reasons why you would use a common law power of attorney document, sometimes called the general durable power of attorney instead.

There are some limitations on gifting in the statutory short term power of attorney. In the statutory short term power of attorney, your attorney in fact, can only gift up to the annual federal exclusion rate. There may be a reason to gift above that rate that you’ve identified with your financial advisor or attorney, and this limitation may cause a problem. Additionally, the statutory short form power of attorney document cannot be altered in any manner because if it's altered, then it's deemed invalid.

However, with the common law power of attorney, you can decide who can gift and how much they can give with a lot more flexibility. You can also give certain powers to your attorney in fact, under a common law power of attorney document that would make it easier for your attorney in fact to help you qualify for medical assistance or do medical assistance planning and other estate planning in the future.

Why is this important?

A lot of clients come to us and tell us that they took their power of attorney to some of the larger or big national financial institutions, and the institution wouldn't honor the power of attorney document. Instead the made the clients fill out their own form.

Now, I always encourage my clients to be congenial and easy to work with when it comes to these financial institutions. However, they are arguably committing bad acts by failing to honor your power of attorney document because statute says there could be a third party liability if your attorney in fact needs to use your power of attorney document and they get denied for improper reasons under statute.

Sometimes your attorney in fact might need to push a little bit to get your power of attorney document honored because chances are, if they're using it, you may not be in a position to do any banking yourself.

Because issues with financial institutions sometimes arise, I always encourage people to take their power of attorney into the bank before they have capacity issues, get it on file, and fill out any forms requested by the financial institution because it's easier to do it in advance of a crisis.

Those are the five big things you should know about your power of attorney document. You are now probably the most informed person you know on the subject matter!

Cheers to you. Remember that a power of attorney is only one part of your overall working legacy plan.

So to make sure that you have all the parts that you need, download our free checklist, the 10 Essential Things To Have, Know and Do To Create A Legacy That Lasts.