Written by David G, Knitter
Beware- Powers of Attorney can be abused.
A recent article in the Wall Street journal likened a financial power of attorney to a “license to steal”. A common form of financial elder abuse is abuse of powers of attorneys, most often by family members who were appointed. This problem is caused by the use of “boilerplate” documents that grant broad all encompassing powers without providing for your protection in the document. This allows the agent (person you appoint to handle matters) complete authority over all assets with little, and often no oversight at all. What many advisors, including attorneys, fail to tell their client is that a power of attorney can be tailored to their desires and is not a prepackaged document as part of an estate plan. There are protections available to reduce the risk of the agent being unable to resist temptation or justifying the stealing by believing “they will get it anyway”.
There are practical as well as legal protections. A great way to prevent problems is to involve your family or a friend in addition to the agent so someone can look out for you if the agent starts treating your money and assets as their own. Talking about the powers and your intent, such as a desire to remain in your home, should be discussed. Consider a family meeting before the documents are signed so the expectations are clear.
Make sure the power of attorney allows the other family members to obtain information from the agent upon reasonable request. Secrecy of asset and financial information from others is a recipe for abuse of the power. Limit the powers of the agent in the document to make sure your wishes are met. For example, exclude or limit the power to sell your home to specific circumstances if you do not want the agent to sell your home on their whim. Require that the agent provides a periodic accounting to another family member, your friend or trusted advisor. This will allow someone to detect the stealing before all the assets are gone.
Select an agent who is both trustworthy and financially responsible. Often we feel obligated to provide the power to our best friend or oldest child or the like. It does not need to be your child if they are not responsible with money. Giving the power to a person who lives beyond their means often creates temptation. Someone with a history of alcohol or drug dependency creates risk of loss to your assets. To reduce the risk of becoming a victim, choose the agent wisely. You are giving someone the right to use, transfer and sell your assets. Do so wisely and demand that the protections are included in your Power of Attorney.