Power of Attorney Fraud
Power of Attorney recognizes and legally allows for one individual – usually a trusted relative or family friend – to make a wide variety of decisions on behalf of another individual who may be elderly, frail, ill, handicapped, or incapacitated. Power of Attorney affords an immense degree of power and influence to the person bearing that status (often called the agent), and with that comes the capacity for significant abuse.
Power of attorney abuse targets those who cannot adequately care for themselves: typically elderly, sick, and disabled people. An agent is granted power of attorney in order to aid with legal, financial, medical, and other decisions. For this reason, the agent also often has access to funds, property, and personal information. To guard against power-of-attorney abuse, stay well-informed about the facts, responsibilities, and control associated with this designation.
What is Power of Attorney?
A Power of Attorney is a legal document that establishes a relationship between two people: the Principal and the Agent or Attorney-in-Fact. The Principal designates or authorizes the Agent to act on his or her behalf. The Power of Attorney or POA is the document that grants the authority of the Agent over the Principal.
Typically, the Power of Attorney contract remains valid until the Principal rescinds it, passes away, or loses mental capacity. But in a Durable Power of Attorney, the Agent retains all the powers and rights granted by Power of Attorney even if the Principal becomes mentally incapacitated. While this arrangement is typically intended to ensure the fulfillment of the Principal’s wishes and decisions in case of incapacity or incompetence, this situation can leave the Principal particularly vulnerable to financial abuse, since the agreement gives almost limitless power to the Agent or Attorney-in-fact over the Principal’s financial and other matters.
Another sub-category Power of Attorney is Springable Durable Power of Attorney, where the Power of Attorney becomes effective after a certain date or event specified in the contract.
How can Power of Attorney be abused?
Power of Attorney abuse occurs when the Agent in the agreement takes advantage of his or her position and makes decisions on the Principal’s behalf that benefit the Agent without the Principal’s knowledge or consent. Power-of-Attorney abuse can take any number of forms, the most common of which is financial abuse.
Financial Abuse and Exploitation
Because most powers of attorney allow complete control over the Principal’s finances, perpetrators of power-of-attorney abuse may steal or embezzle funds from the Principal’s account for personal use while claiming that it will benefit the elder. If an agent uses an elder’s finances or assets for personal benefit, the agent may be guilty of conversion.
Any instance of appropriating an elderly or ill Principal’s funds for personal use could constitute financial exploitation. If an agent uses their power of attorney status to make purchases, investments, or other financial transactions for their own benefit instead of the Principal’s, they could be committing power-of-attorney abuse.
Fraud, Forgery, and Identity Theft
With full access to the Principal’s accounts and personal information, a power-of-attorney scammer might open bank accounts, credit cards, or purchase annuities and insurance products in the elder’s name. These actions, bordering on identity theft, could hold the Principal accountable for any fraud or illegal conduct committed by the Agent under the guise of the Principal. Furthermore, the agent may commit welfare fraudor tax fraud using the Principal’s name and personal information, thus furthering the harm done to the elder at the gain of the Agent.
Another instance of fraud and forgery is the act of changing the principal’s estate or beneficiary designations to benefit the agent against the wishes or without the consent of the Principal.
In what could be an instance of physical abuse, an agent granted power-of-attorney may make inappropriate and harmful medical decisions on behalf of the Principal. These decisions include, but are not limited to: committing the elderly agent to a nursing facility; making unnecessary and expensive medical appointments or purchases; or failing to place the elder in an appropriate medical facility or access to adequate care. Whether out of malice or negligence, these actions could constitute power-of-attorney abuse.
Breach of Fiduciary Duty
Every person granted Power of Attorney owes a fiduciary duty to the Principal. These duties include, but are not limited to: keeping the elder informed about the status and any changes to the elder’s finances, medical affairs, and other accounts or information covered by the agreement; receiving consent from the elder before reaping any profit from the elder’s accounts or finances; maintaining and acting according to the elder’s interests at all times; and refraining from transferring any of the elder’s property. Failure to abide by these duties, or any breach of these duties, may constitute power of attorney abuse.
Who is at risk for Power of Attorney abuse?
Powers of attorney are usually granted to provide for elderly, sick, and disabled individuals who are already in emotionally and physically vulnerable positions. For this reason, dishonest individuals who seek opportunities to swindle funds from unsuspecting elders are drawn to commit Power of Attorney abuses and other types of physical and financial elder abuse.
Elders who live alone or who have few close relatives may be susceptible to Power of Attorney abuse. In many cases, a distant relative will resurface in the elder’s life and offer to sign a Power of Attorney agreement by promising to provide adequate medical care for the elder. In other instances, fraudulent estate planners or trust managers will promise to manage the elder’s finances, but designate themselves Power of Attorney in order to exploit or otherwise defraud the elder.
Signs of Power-of-Attorney Abuse
As listed above, Power of Attorney abuse can manifest itself in many ways. Be aware of the following potential signs and symptoms of power-of-attorney abuse.
- A sudden an inexplicable change in the finances of medical affairs of the Principal
- Secrecy or reluctance to communicate by the Agent
- The Agent’s refusal or reluctance to share financial information or records with the Principal
- Any signs that the Agent is making decisions on behalf of the Principal without consulting or gaining consent from the Principal
- Any demands that the Principal sign unfamiliar or unexplained documents
- Any signs of financial exploitation, identity theft, fraud, or financial abuse
What can I do to prevent Power of Attorney abuse?
An Agent granted Power of Attorney must be a close and trusted individual – someone you fully believe will make decisions in accordance with your needs and wishes. Never grant power of attorney to a stranger, and be extremely cautious with financial advisors, caregivers, or other paid acquaintances.
Make sure to keep trusted family members, friends, and advisors informed about who has Power of Attorney status. Be sure to retain all access and control to your financial, medical, and personal records, and follow-up often to make sure no sudden or unauthorized changes have been made.
Ensure that you retain the right to take back power of attorney under any circumstance, and do not release power of attorney unless it becomes absolutely necessary. Be very cautious of signing any durable power of attorney, as it typically affords the agent total or near-complete power over your affairs.
What resources are available for victims of Power of Attorney fraud?
The types of abuses that can be committed with Power of Attorney are vast and serious. It is critical to remember that forcing an elder to grant a Power of Attorney against their will could be an act of Power of Attorney abuse in and of itself. Power of attorney abuse is often an instance of financial exploitation, which is illegal and punishable by federal and California state laws.
If you believe that you or a loved one has suffered Power of Attorney abuse or elder abuse in California, contact the Evans Law Firm at 415-441-8669 or 800-50-EVANS, or email firstname.lastname@example.org for a free and confidential consultation with a California lawyer.