Power of Attorney (POA): When Temptation Turns to Power of Attorney Abuse

By its very nature, powers of attorney (POA) invite power of attorney abuse and over-reaching by the parties, called agents, who are to carry out the terms of a power of attorney. Fortunately, most people honor their duties under the law of a POA to act in a fiduciary capacity. However, for a steadily increasing number of POAs, there seems to be a trend against trustworthiness. This trend is occurring for at least three reasons:

  1. Because people who are granted the powers do not understand their role;
  2. Because the person granting the power of attorney is suffering from limitations and unable to police its use;
  3. Because the parties do not have adequate skills  to communicate misunderstandings.

POAs are here to stay: but while every state has some form of POA, differences also exist in every state.

Enforcing Power Attorney Agreements to Prevent Power of Attorney Abuse

There are many reasons to have a power of attorney, and the motivation for drafting the agreement often dictates its structure and details. These differences account for why two major laws address two types of POAs: the Uniform Durable Power of Attorney Act, adopted in almost all states for financial matters and the Uniform Health Care Decision Act for health care matters.

In 2006, a new uniform code of POA was created, but less than a dozen states (including Idaho, Nevada, New Mexico, and Colorado) have so far adopted it. The law in those states has granted courts increased authority to monitor for possible misconduct by POA agents. The new law was a direct response to increased abuses of POAs, especially toward the elderly and infirm. 

When Power of Attorney Begins: Have Safeguards and Check-Ups

Every state has a special division to take allegations of abuse against seniors and the disabled. And abuse of power under a POA is a crime...local law enforcement, with larger cities having business crimes units, can be called to investigate suspicions of financial abuse.

You should also make sure to impose your own checks and balances in a power of attorney document. As with any financial or health care planning, regular check-ups have to be included in the instrument to keep the POA healthy. Having more than one agent, with designated expertise, may sometimes set the stage for conflicts and tensions between the multiple agents...or may save grief for the principal by forcing monitoring.

Be mindful of the time limit for your power of attorney agreement as well. Historically, POAs are almost always limited in duration, and expire in one year. Increasingly, however, more abuse issues are arising in durable power of attorney situations associated with long-term health care issues. 

Power of Attorney, Not Attorney In Fact

Well-intentioned power of attorney instruments are increasingly being the subject of problems, which are almost exclusively questions of misunderstanding and ignorance rather than malice or greed. Unfortunately, simple mistakes often turn into deliberate cover-ups.

One of the biggest single causes of these avoidable misunderstandings is poor selection of the POA agent/representative. Due to mobile families and successive marriages and divorces, with extended familial ties, many people feel compelled to appoint virtually anyone they consider close enough, geographically, to trust. However, there are professionals available who may make the best POA agents.

Attorneys are often the perfect ones to appoint as representatives or to assist family members. One reason is because if acts of malfeasance do occur, the attorney is more likely to be able to produce a collectible judgment. Banks, on the lookout for new fee-based services, are also increasing their trust services, including POAs. The good news is the professionalization of banks in this area...and their increased awareness of potential POA fraud, even when they are not acting as the Agent.

Many cases of power of attorney abuse involve family members. And, it is often difficult to tell whether power of attorney abuse is really even occurring since POA's provide for a reasonable level of privacy. If you suspect that your loved one is a victim of power of attorney abuse, you should contact an attorney. It may be best to seek the appointment by the court of a guardian, or conservator, in cases where the victim is incapacitated or incapable of advocating on their own behalf.