Power of Attorney Laws
Power of Attorney Abuse in California
When you think of individuals who typically engage in elder abuse, certain actors might come to mind — for example, an overworked nursing home employee, an unscrupulous financial advisor, or a greedy caregiver. All forms of elder abuse, no matter who they are committed by, can be devastating to their victims, but abuse by those in positions of potentially unlimited power over the victim can be especially dangerous. Abuse of elders by those in power of attorney relationships can wreak havoc upon their physical, mental, and financial wellbeing. Powers of Attorney can cover financial matters or health-related/medical matters.
One piece of advice on all powers of attorney from the beginning – never ever give a caregiver a power of attorney especially over financial matters. Caregivers are hired to assist seniors with day to day living activities and health issues, not financial matters. Select a family member or person you trust for a health care or financial power of attorney or perhaps a professional fiduciary for financial matters.
All attorneys-in-fact under any kind of Power of Attorney owe a fiduciary duty to the principal. Cal. Probate Code § 4266. Abuse of an elderly principal’s Power of Attorney for the agent’s benefit is a breach of that fiduciary duty and potentially criminal. Cal. Probate Code § 4231.5; Cal. Penal Code § 368. Below, we’ll examine power of attorney abuse — what it is, how to avoid it, and how to seek legal recovery should it occur. For more information about any of the topics discussed herein, please contact the California power of attorney abuse attorneys at the Evans Law Firm.
What Is a Power of Attorney Relationship?
You may have heard the term “power of attorney” used before in the context of elder care or estate planning but might not know exactly what it means. After all, an attorney is someone with expert training you hire when you need legal assistance. How can you simply grant anyone the power to be an attorney?
In simple terms, a power of attorney relationship allows one person (the “principal”) to delegate decision-making authority on his or her behalf to another person (the “agent” or the “attorney-in-fact”). They are typically used in cases where the principal may be unable to make decisions for himself or herself due to advanced age, frailty, incapacitation, or mental decline. The agreement between the two parties determines how much authority the attorney-in-fact yields over the principal’s affairs. In California, a principal may delegate any or all of the following powers to the agent:
- Real estate transactions
- Tangible personal property transactions
- Stock and bond transactions
- Commodity and option transactions
- Banking transactions
- Insurance and annuity transactions
- Estate, trust, and beneficiary transactions
- Legal claims
- Personal and family maintenance
- Government benefits
- Retirement plan transactions
- Tax matters
As you can see, an attorney-in-fact can exercise virtually total control over the principal’s affairs, including his or her legal, financial, and medical affairs. As mentioned above, there are also Powers of Attorney and Advance Health Care Directives for granting powers over medical treatment decisions. Powers may be “springing” powers that become effective only when the principal is incapacitated or unavailable (Cal. Probate Code § 4030) or “durable” powers which are effective immediately upon execution of the power (Cal. Probate Code §§ 4018 and 4124). Regardless of the form, powers of attorney are beneficial when the agent is trustworthy. However, not all agents/attorneys-in-fact act solely in the interests of their principals, but instead misappropriate their power for personal gain.
The California Probate Code: How Power of Attorney Relationships Are Created & Governed
Power of attorney relationships in California are governed by Division 4.5 of the California Probate Code. Cal. Probate Code §§ 4000 et seq. A few key provisions of the statute follow.
All natural persons who possess the capacity to contract may execute a power of attorney agreement. In order to be legally valid, a power of attorney agreement must meet all of the following requirements:
- The agreement contains the date of its execution
- The agreement is signed either (1) by the principal, or (2) in the principal’s name by another adult in the principal’s presence and at the principal’s direction
- The agreement is (1) notarized, or (2) signed by at least two adult witnesses who witnessed the signing of the agreement. (Cal. Probate Code 4121)
In the agreement, the principal is allowed to grant authority to the attorney-in-fact to act on the principal’s behalf with respect to “all lawful subjects and purposes,” or with respect to certain, express subjects or purposes. Cal. Probate Code § 4123(a). A power of attorney may be made “durable” (i.e., the relationship continues even if the principal becomes mentally incapacitated), by adding words such as “this power of attorney shall not be affected by subsequent incapacity of the principal.” Cal. Probate Code § 4124. Once the agreement is executing, all acts of the attorney-in-fact have the same legal effect as if they had been undertaken by the principal.
Qualifications, Duties, and Authority of Attorney-in-Fact
There are very few qualifications necessary to serve as an attorney-in-fact other than being an adult person with the capacity to contract. In some cases, the principal may designate more than one attorney-in-fact or may designate successive attorneys-in-fact in the event that a previous attorney-in-fact’s authority is terminated. All persons who serve as attorneys-in-fact are entitled to reasonable compensation for their services and to reimbursement for expenses incurred as a result of acting as an attorney-in-fact. Cal. Probate Code § 4204.
Above all, the law imposes a fiduciary duty upon all attorneys-in-fact, which requires that they act solely in the interest of the principal. Cal. Probate Code §§ 4230 et seq. Specifically, this includes:
- Avoiding conflicts of interest. Probate Code § 4232(a).
- Keeping the principal’s property separate and distinct from the attorney-in-fact’s. Cal. Probate Code 4233.
- Maintaining regular contact with the principal and following his or her instructions. Probate Code § 4234.
- Keeping records of all transactions entered into by the attorney-in-fact and making an account of them to the principal. Probate Code § 4236.
- If the principal becomes incapacitated, the duty to consult with the principal’s spouse, physician, attorney, other family members, business entities, or government agencies before taking action that would affect the principal’s personal affairs, welfare, family, property, and business interests. Cal. Probate Code 4235.
The power-of-attorney agreement generally governs the scope of the attorney-in-fact’s authority. This means that, if a power of attorney grants general authority to an attorney-in-fact with no limitations, the attorney-in-fact has full authority to act within the statutory limits. Cal. Probate Code § 4261. If the power of attorney grants limited authority to the attorney-in-fact, he or she may only exercise authority within the specific limitation, as well as any authority incidental, necessary, or proper to carry out the granted authority. Cal. Probate Code § 4262. Under no circumstances, however, may an attorney-in-fact make, amend, or revoke the principal’s will. Cal. Probate Code § 4265.
Modification and Revocation
A principal may modify a power of attorney in accordance with the agreement’s terms or by executing a subsequent power of attorney agreement. Cal. Probate Code § 4151. He or she may also revoke a power of attorney either in accordance with the terms of the agreement or in writing. Cal. Probate Code § 4151. A power of attorney is also revoked automatically in several circumstances, such as by the terms of the agreement, by the death, resignation, or removal of the attorney-in-fact, or by the death of the principal. Cal. Probate Code § 4152.
If you have questions about the creation, modification, or revocation of a power of attorney agreement, please contact the California power of attorney abuse attorneys at the Evans Law Firm.
How Attorneys-in-Fact Can Abuse Their Principals
With the ability to exercise almost unlimited power, unscrupulous attorneys-in-fact can easily fall prey to greed, malice, and a disregard for the wellbeing of their principals. In some cases, these behaviors can even rise to the level of elder abuse. Some of the most common forms of power of attorney abuse include:
Fraud occurs when one person deliberately deceives or misrepresents facts to another person with the intention of causing physical or financial damages. When it is perpetrated upon elders, it is considered to be a form of financial elder abuse. Cal. Welf. & Inst. Code § 15610.30. Some common forms of fraud include securities fraud, credit card fraud, charities fraud, Medicare fraud, and pyramid schemes. Because many attorneys-in-fact have full control of their principal’s finances, they can engage in fraud in several ways, such as by opening lines of credit, applying for government benefits, or purchasing securities or annuities in the principal’s name.
Theft, an arguably simpler and easier to commit crime than fraud, occurs when one person intentionally takes the personal property of another with the intent to deprive the other of its use. In many cases, attorneys-in-fact who steal start small, such as by taking a little bit of money to pay for a meal or a new outfit. Over time, however, this behavior can snowball and result in serious and long-term financial harm to the principal.
Identity theft occurs when one person uses another person’s private information — such as their social security number, bank account number, address, phone number, or internet passwords — to commit a crime or perpetrate a fraud. This could include opening lines of credit, gaining access to bank accounts, and selling personal information on the dark web. Attorneys-in-fact have access to a large amount of their principal’s identifying information, which they can then use for their own personal gain to the detriment of the principal.
Physical Elder Abuse
Power of attorney abuse is most often financial in nature, but can also rise to the level of physical elder abuse in situations where the attorney-in-fact has been given authority to make medical decisions on behalf of the principal. Examples of this type of physical elder abuse include committing the principal to a nursing facility, refusing to provide the principal with proper care, or authorizing expensive and unnecessary medical procedures. Physical elder abuse can have dire consequences for its victims, as many are already in a weakened physical and mental state.
For more examples of actions that constitute power of attorney abuse, please contact the California power of attorney abuse attorneys at the Evans Law Firm.
Legal Options to Combat Power of Attorney Abuse
Victims of power of attorney abuse are not without legal recourse. Two of the most common causes of action in this context are breach of fiduciary duty and conversion.
Breach of Fiduciary Duty
As mentioned above, attorneys-in-fact owe their principals a fiduciary duty, which means that they must act solely in the interest of the principal and put the principal’s interests above his or her own. A few ways attorneys-in-fact could breach their fiduciary duties include:
- Engaging in transactions that present a conflict of interest
- Commingling the principal’s assets with their own
- Failing to keep records and make accountings to the principal
- Misappropriating the principal’s assets
- Failing to provide suitable medical care to the principal
In order to succeed on a claim of breach of fiduciary duty, the plaintiff must show (1) that a duty existed on the part of the attorney-in-fact, (2) that the attorney-in-fact breached that duty by failing to observe the standard of care that would be observed by a prudent person in similar circumstances, and (3) the breach caused the plaintiff to suffer damages.
The California Probate Code sets out the measure of damages to be assessed if the attorney-in-fact has been found to have breached his or her fiduciary duties as:
- Any loss or depreciation value of the principal’s property resulting from the breach of duty, with interest,
- Any profit made by the attorney-in-fact through the breach of duty, with interest
- Any profit that would have accrued to the principal if the loss of profit is the result of the breach of duty
Whenever, an agent abuses a power of attorney, the principal may sue for all available injunctive relief (stopping the agent from transacting business and undoing wrongful acts) and damages, including punitive damages in certain circumstances, and for an award of attorneys’ fees and costs for bringing the lawsuit against the offending agent. Cal. Probate Code § 4545.
“Conversion” in civil law equates to theft in criminal law and is so called because the defendant “converts” the plaintiff’s property to his or her own use. In the context of power of attorney relationships, conversion can occur when the attorney-in-fact steals, embezzles, or otherwise misappropriates the principal’s finances. To prevail on a claim of conversion, the plaintiff must show (1) the plaintiff owned or had a right to possess the property, (2) the defendant converted the property by a wrongful or disposition of the property, and (3) the defendant’s conversion caused the plaintiff to suffer damages.
How to Avoid Power of Attorney Abuse
The key to avoiding power of attorney abuse is to select an attorney-in-fact who is unlikely to engage in it. The ideal candidate for most attorneys-in-fact should:
- Be trustworthy
- Be articulate and communicative
- Live near the principal
- Have financial management skills and investment knowledge
- Have a basic understanding of medical processes
- Understand the principal’s history, circumstances, and family dynamics
Family members are often chosen to serve as attorneys-in-fact as they frequently possess most, if not all, of these characteristics, but attorneys-in-fact can also be friends or business partners.
Contact the California Power of Attorney Abuse Attorneys at the Evans Law Firm
For more information about any topic herein, including the California Probate Code, examples of power of attorney abuse, or choosing the right attorney-in-fact, please contact the California power of attorney abuse attorneys at the Evans Law Firm by filling out our online form or calling us at 415-441-8669