A power of attorney can be an effective and inexpensive tool for handling general transactions and business affairs, but it does not come without pitfalls and risks. By definition, a power of attorney is an instrument in writing whereby one person, as principal, appoints an agent and gives that agent authority to act on his behalf. If the power of attorney is created as a durable power of attorney, the powers conferred remain effective even if the principal becomes disabled. Many of my older clients will give a family member a power of attorney as a mechanism to ensure that their business is properly handled as the principal becomes older and less capable of managing their affairs.
The pitfalls of a power of attorney are evident, but the story of former University of South Carolina quarterback Corey Jenkins provides a perfect illustration. Jenkins was a talented football and baseball star at Dreher High School in Columbia, South Carolina. He signed a lucrative baseball contract worth over $500,000.00. Due to Jenkins' limited expertise with money, he elected to hire a local management company to handle his business. This management company convinced Jenkins that he needed to give them power of attorney as part of their relationship. With the power of attorney, the company had full access to Jenkins' accounts and the unlimited ability to enter him into contracts. Ultimately, the company wasted the money and entered Jenkins into several contracts without his full knowledge. While the individuals associated with the management company were indicted, Jenkins has never received restitution and he defaulted on many of the contracts.
The dangers associated with a power of attorney can be lessened by following several simple steps. It is imperative that the principal has a complete level of comfort with the agent. A good lawyer will advise a principal that the agent has potentially full authority to act on their behalf. Those powers could include buying property, endorsing checks, signing contracts and a litany of other functions. You should never give someone power of attorney unless a relationship of trust exists between the parties. Furthermore, it is completely acceptable to limit the power of attorney to certain functions. For example, Corey Jenkins could have designated in his power of attorney that the management company could only use his money to close on a new house for his mother. This option is called a limited power of attorney. Finally, the power of attorney is easily revoked under the law. If a principal changes his mind or becomes uncomfortable with an agent, the law allows a simple revocation of the power of attorney to be filed with the Clerk of Court.
If you have any questions or concerns, please feel free to contact the Finklea Law Firm to discuss the power of attorney in a greater detail.
~ Charlie J. Blake, Jr. (May 2013)