Financial Power of Attorney – License To Steal
Powers of attorney that grant another person the authority to make financial decisions for an elder have sometimes been described in the law as a license to steal. It’s shocking when a son or daughter takes advantage of their elderly parent, and uses such a document to deplete bank accounts or even transfer title of the elder’s home.
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Generally speaking, there are two types of powers of attorney for financial matters. The first (and generally recommended) is known as a “springing power”. This power of attorney does not become effective unless one or more qualified medical doctors declare, under penalty of perjury, that the elder is mentally incapacitated and unable to make sound financial decisions. Only when this medical declaration has been obtained, does the power “spring into being” and become effective.
The second type of power of attorney takes effect immediately. There is no requirement that any doctor be involved before the authority takes effect.
Either document, placed in the wrong hands, grants authority for the “agent” to handle any and all financial transactions that the elder could. This includes opening and closing bank accounts, changing ownership of those accounts, withdrawing money, and even transferring title from one’s home. An unscrupulous “agent” can take advantage of an elder with a diminished mental capacity quite easily.
The power of attorney requires that it be signed in the presence of a notary public. However, a notary’s primary duty is to obtain proof of the signor’s identity. In most states, a notary does not have the responsibility to assess whether the elder understands the meaning or consequences of the document itself.
Often, the perpetrator contacts a notary beforehand, and gives a false story of the family dynamics involved. S/he explains why the elder needs to have the power of attorney, and then expresses gratitude that the notary is willing to help out this aging parent. The unsuspecting notary is now less suspicious when the elder appears confused as the document is presented for signature.
Some good news: A power of attorney for finances can easily be revoked, if the document’s existence (and its misuse) is discovered by a caring and trusted person. However, the elder often suffers from some form of dementia and doesn’t even remember that the document was ever created. If the elder lives alone and is isolated, no one else may know about the document, except the perpetrator.
Simply revoking a power of attorney doesn’t always work either. An unscrupulous “agent” can simply take advantage of the elder again by repeating the process: wait until the right moment (when the elder is mentally vulnerable) and have another power of attorney executed.
If this occurs, then it may be necessary to establish a conservatorship over the elder’s estate. In California, for example, when a conservatorship is created, the power of attorney is automatically terminated. The court then grants authority for someone (a “conservator”) to handle the elder’s finances and account to the court regarding all monies received and spent.
Such powers of attorney are a valuable tool when placed into the hands of a trustworthy friend or relative. But, when placed into the wrong hands, greed can turn it into a license to steal.