Here at AgingOptions, through our partnership with Life Point Law, our staff has helped prepare thousands of estate planning documents. One of the most essential of these is what’s called a financial power of attorney, or FPOA. It’s a document that stipulates who will act as your agent in handling your finances if and when you become unable to do so.
Understanding the mechanics of an estate plan is crucial for long-term security. While the concept may appear straightforward, we frequently encounter documents with severe legal deficiencies. Some grant too many powers, and some too little. Some leave critical details unclear, creating confusion and delay.
For this reason, we’re revisiting this 2023 article from Kiplinger in which an estate planning attorney named Allison Lee explains some of the pitfalls – she lists five in all – that you or someone you love can accidentally stumble into if you are careless in preparing your financial power of attorney.
The Serious Risks of an Inadequate Financial POA
Lee begins her Kiplinger article with a brief definition. “Estate experts agree that a financial power of attorney is one of the most important documents to include in your estate planning,” she explains. “It allows you (the ‘principal’) to name a person you trust (your ‘agent’) to make decisions about your property and finances if you cannot.”
Proactive financial planning requires a deep understanding of these legal instruments. She is quick to warn that while a financial power of attorney is a “powerful tool” in your estate planning tool belt, preparation of an FPOA needs to be approached with careful consideration, because the consequences for not doing so could very well be very serious.
Below, we review the five primary mistakes identified in the original report. We’ve also asked Rajiv to weigh in, and he adds a sixth mistake which he says is worse than all the rest. Read on and we’ll see what the issues are.
Mistake #1: Failing to Name an Alternative Agent
When it comes to choosing a trusted agent, your first choice – whoever that may be – is probably your first choice for a valid reason. You picked them because you feel that you can trust them to handle your affairs, and that’s significant. But Lee still encourages you to have a backup agent in mind, just to make sure that your estate plan is that much more foolproof.
“Designating an alternative agent allows you to specify who will manage your affairs in the event your first choice passes away, becomes incapacitated, resigns, or simply refuses to act, among other reasons. It can also help avoid having the court appoint a new agent, as it may not choose someone you would have picked.”
The old adage is true: don’t put all your financial eggs in one basket. Always consider naming a back-up agent.
Mistake #2: Creating a “Springing” Agency
Sometimes a well-intended contingency plan can end up creating more confusion than it solves, and so it is with what Lee calls a “springing agency.”
“It’s reasonable to expect that your agent will not act on your behalf until you become unable to manage your own affairs. When an agency is conditioned on the incapacity of the principal, it’s sometimes called a ‘springing agency,’ because it springs into existence upon a triggering event. Provided your state recognizes springing agencies (not all states do), they can be a viable option if you ultimately decide one is best suited for your situation.”
But so-called springing powers of attorney can have downsides and drawbacks. “For example,” Lee explains, “they can create unnecessary delays, uncertainty, and strife, since the agent must essentially jump through hoops at a time of need. Financial institutions are also more reluctant to accept springing powers of attorney, because they are concerned about whether the triggering event has occurred.” In other words, in a crisis, you may not want your agent being forced to prove your incapacity before they can act on your behalf.
Strategy: Empower Your Financial Power of Attorney Immediately
The fix? According to Lee, it’s generally preferable to set powers that are effective immediately. “In this case,” she writes, “you can ask your agent to not act on your behalf until or unless you become incapacitated. Until this time, you can simply keep the document yourself in a safe place, until the agent needs it.”
Choosing the right representative involves a high level of mutual transparency. She adds, “If you’re concerned that your agent may disregard this request and try engaging in transactions on your behalf, it’s probably time to reconsider if you’ve chosen the right person for the job.” Translation: don’t select someone you can’t trust.
Mistake #3: Granting Overbroad Gifting Powers
“One of the most powerful authorities that can be granted to an agent under a power of attorney is the power to give away the principal’s property to others,” Lee writes. Why would you want to do this? There are lots of reasons to grant your agent the authority to give gifts on your behalf.
“For example,” Lee explains, “maybe you want to make sure your agent provides birthday and holiday presents to your relatives, just as you normally would. Or maybe you want your agent to make charitable donations on your behalf to particular causes that you’ve been supporting. The power to make gifts can also help in managing Medicaid eligibility and minimizing estate taxes.”
Protecting Wealth: Power Can Trigger Abuse and Fraud
But just like with any powerful tool, the risks of giving broad authority to make gifts from your assets must be assessed first before you offer it. Financial abuse or fraud are real dangers here.
One way to avoid this is to consider restricting your agent’s gift-making authority, strictly limiting the list of persons to whom your agent is allowed to give gifts, including themselves.
Lee explains, “You should also specify the total value of gifts your agent will be authorized to make in a given year. Failing to set a limit on the maximum dollar value of gifts an agent can make to themselves in any given calendar year could have tax consequences. Often, principals simply impose a limit by setting that cap based on the annual federal gift tax exclusion amount.” (Note that, in 2026, that limit is $19,000 per recipient.)
Mistake #4: Not Alerting All Concerned When Your POA Changes
As they say, communication is key, and this is especially true for legal documents like a POA.
“Many powers of attorney include an express statement that all old powers of attorney are revoked or canceled whenever the document is updated or replaced,” says Lee. “Any agents acting under a previously authorized power that is now void should be notified in writing right away to avoid any confusion — or worse. If an old power of attorney is on file with your bank or other financial institution, be sure to reach out to them, as well, and have them substitute out the superseded document.”
Mistake #5: Inadequate Planning for Managing Real Estate
Real estate management is one of the most common powers given to agents in a financial power of attorney, including the authority to rent or sell property, pay for repairs, or hire a real estate agent to assist with transactions. But the rules can be more complex than you might think.
Lee writes, “If you want to grant your agent this power, you may need to file your document with your local land records office. It’s a good idea to contact your county’s land records office to learn about any specific requirements it may have to ensure your power of attorney document is in compliance. For example, some offices require documents to have specific margin sizes to make room for filing stamps.”
To draw her article to a close, Lee finishes on a wise yet hopeful note. She writes, “A financial power of attorney is an important part of a comprehensive estate plan. To make yours work for you, it’s important to take into account your needs and objectives and plan with them in mind. By carefully planning today, you’ll be prepared for life’s unexpected moments.”
Rajiv’s Take: Is Your FPOA Ready to Assume the Burden?
In his extensive legal career, Rajiv has seen it all. “As I read this article,” he says, “the information seems all well and good. But I think it overlooks the biggest problem of all: failure to prepare your financial power of attorney for the work that’s going to be dumped into his or her lap.”
As Rajiv often says, none of us wants to become a burden to those we leave behind – but that is probably wishful thinking. “Look, the moment you fall ill or pass away, those people you’ve put in charge of things are going to assume a burden they may not be prepared for,” he states.
In Most Cases, Family Members Aren’t Properly Prepared
Consider what’s involved, Rajiv adds. “Think about it: your financial power of attorney will be expected to pay your bills, pay your property taxes, write checks to anyone doing repair work on your house, make sure your charitable donations go where you want, make sure the license tabs on your car get renewed, keep your online payments current, pay your insurance bills – the list is endless. Your son, your daughter, your sibling, your best friend — are they ready for that? In most cases, the answer is a loud no.”
The solution, Rajiv says, is honest communication and careful planning. He says, “I recommend you and your financial power of attorney sit down well ahead of time with a lawyer who can thoroughly explain what the job entails, and make sure everyone is ready and knows where everything is and what’s expected. Bring an alternate with you.”
Rajiv adds, “Naming an FPOA is a big, big step. Not only do you need to get it right, but you owe it to that person to give them every tool they need to do the job. Unless you prepare them well, they may regret the day they agreed to serve! And no one wants that.”
Rajiv Nagaich – Your Retirement Planning Coach and Guide
Rajiv Nagaich’s newest program on PBS, called Designing Your Ideal Future, is bringing Rajiv’s powerful message to Americans from coast to coast. This engaging and challenging PBS show is prompting thousands to take a fresh look at the type of planning that will help them succeed in retirement.
In this one-hour PBS special, Rajiv Nagaich takes viewers step-by-step through the principles of creating a retirement plan that truly supports the life you want to live. Instead of generic check-the-box paperwork, Rajiv reveals how to infuse your perspective — your values, goals, and priorities — into every legal document and life plan component so your plan becomes a living system for your future.
Designing Your Ideal Future includes insights from real-world planning examples and a live Q&A with Rajiv Nagaich that answers viewer questions about retirement planning, legal readiness, and family communication. It’s perfect for anyone approaching retirement, currently retired, or responsible for a loved one’s future care — and for those who want a clear, effective approach to planning that prioritizes personal choice and quality of life.
Assessing Your Family Retirement Strategy
You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then these materials are your key to retirement success.
Visit your local PBS station’s schedule to find airtimes and learn how to access companion resources — including a free Legal Readiness Quiz and tools to help build your complete LifePlanning system.
Don’t remain among the millions of Americans sleepwalking their way into a retirement they never wanted. Instead, your retirement can be the exciting and fulfilling life you’ve always hoped it would be. Start by watching, reading, and sharing Rajiv’s important message.
And remember, Age On, everyone!
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