Critter Corner: How Can a Power of Attorney Protect You from Exploitation?

Dear Angel,

I was recently listening to a true crime podcast and heard an alarming episode. A woman, Caroline, created a power of attorney for an older man, Charles, and moved into his California home. Charles died shortly after, although authorities do not know the cause of death. Caroline had used the fraudulent power of attorney that she drafted to steal his property and assets and forged a will to become a trustee for an estate benefiting herself, valued at $1.7 million.

Unfortunately, this was not Caroline’s only victim. She was suspected of defrauding another victim out of his house worth $1.5 million by also forging his power of attorney documents. The victim,who had mental health issues, died by suicide after losing his home. Caroline was later arrested, forced to pay back more than $3.8 million, and is serving a 20-year sentence in prison. Both these instances were upsetting to hear, to say the least. How can a well-drafted power of attorney protect someone from financial exploitation?

Dee Freud

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Dear Dee,

Many true crime stories unfortunately involve abuse of a power of attorney, where a crooked agent takes advantage of an unsuspecting senior. or even worse, as in the story as you relate above, a forged power of attorney document. These stories are generally terrifying, as it is easy to imagine ourselves being taken advantage of in a similar way. Fortunately, the good news is that a well-drafted power of attorney, given to the right agent, can help you or someone you love from becoming a victim of fraud.

How Does a Power of Attorney Help?

Criminals of this sort often prey on older adults, recluses, and people with mental disabilities. If the victims had a well-drafted Power of Attorney by an experienced elder lawyer, they would have someone they trust to manage their affairs and their agents could help prevent fraudulent activity.

Here’s how a POA and a trustworthy agent will ultimately help safeguard you from fraud:

• With a properly-drafted power of attorney, your agent has a fiduciary duty to act in good faith and in your best interest.
• When choosing an agent for your power of attorney, you should choose an organized, responsible, and trustworthy person. They should be attentive to your affairs and look out for fraudulent activity against your property and assets.
• Your agent will handle your financial decisions and legal affairs. They may do things such as pay bills, open mail, access your bank accounts, and file your tax returns. They may also buy and sell your property.
• In a power of attorney document, you can limit what actions your agent can perform. For example, you may want to include language that prevents your agent from gifting your money to himself or herself or changing beneficiary designations on your will, trust, life insurance policy, and investment accounts.

If the agent fails to act in accordance with these fiduciary duties in good faith, the agent may be liable for breaching the fiduciary duty. The senior, or someone on behalf of the senior, can then file a claim based on financial exploitation.

Many people look for do-it-yourself options using cookie cutter online power of attorney forms, but in doing so, these people may be more likely to get taken advantage of. For something as important as incapacity planning documents, including a financial and durable power of attorney, you should consult an experienced estate planning attorney.

How to Report Power of Attorney Abuse

If family and friends suspect that your agent agent under power of attorney (or anyone else) is exploiting you, they can report it to Adult Protective Services (APS). APS can investigate and stop the abuse. Law enforcement also can be contacted to intervene.

Financial institutions and certain financial professionals are required by law in more than half of the states to report suspected elder financial exploitation to authorities, which can also help prevent power of attorney abuse,. Read more about the law requiring mandatory reporting from banks in Mr. Farr’s recent article on the subject.

If abuse is discovered, legal action can be taken to stop the abuse. It’s of course better to report suspected abuse as soon as possible and to have a properly drafted power of attorney document in place, naming a trusted loved one or professional as your agent, so that abuse and exploitation is less likely to occur.

Hope this is helpful!
Angel