Does a Power of Attorney Really Work? Part I
A power of attorney (POA) is a standard part of every estate plan. In this document the client appoints an agent to take care of the principal’s finances, bills, investments, taxes and other financial matters.
It used to be that the authority of an agent acting under a power of attorney was not questioned. Now, prosecutors and elder-law attorneys say that the number of cases where adult children using a power of attorney are stealing money from parents’ accounts is rising. More than ever before, powers of attorney are being used in “swindles.” That is making banks and other financial institutions reluctant to rely on the power of attorney.
Banks sometimes refuse to execute transactions ordered by an agent under a power of attorney because they are afraid of being parties to a fraud. There are ways to bulletproof these legal documents to improve the chances that banks will honor them-and that loved ones won’t misuse them. But it takes careful planning.
Power-of-attorney abuse garnered national attention after the 2007 indictment of philanthropist Brooke Astor’s son for trying to “unjustly enrich” himself. The son was convicted in 2009 of grand larceny, among other counts, for using a power of attorney to increase his own salary, ultimately siphoning more than $1 million from his mother.
Some financial institutions will only honor powers of attorney created using their internal forms. This is a real problem if the principal is incapacitated and the agent needs to take action on his or her behalf. Some states, including Pennsylvania, have enacted laws to allow those whose valid POAs are not respected by third parties to recover attorney’s fees and damages. But what we want is not the ability to bring a law suit—what we want is for properly executed powers of attorney to be honored.
Stay tuned for more POA details, next week.