Abuse of a Power of Attorney for an Incapacitated Family Member

By John Cromwell

A power of attorney is a legal expression of trust where a principal grants an agent the ability to legally act on her behalf. This may mean that the agent, otherwise known as the attorney-in-fact, can sell the principal’s assets or bind him to contracts. The power of an agent is even greater when she acts for an incapacitated family member. Abuse of that power is not just something that the agent can be sued for; it is also a crime. Powers of attorney are governed by state law, so standards may vary. There is an attempt to make standards regarding power of attorney consistent by getting all states to adopt the Uniform Power of Attorney Act. However, only 13 states have adopted the Uniform Act as of September 2012.

A power of attorney is a legal expression of trust where a principal grants an agent the ability to legally act on her behalf. This may mean that the agent, otherwise known as the attorney-in-fact, can sell the principal’s assets or bind him to contracts. The power of an agent is even greater when she acts for an incapacitated family member. Abuse of that power is not just something that the agent can be sued for; it is also a crime. Powers of attorney are governed by state law, so standards may vary. There is an attempt to make standards regarding power of attorney consistent by getting all states to adopt the Uniform Power of Attorney Act. However, only 13 states have adopted the Uniform Act as of September 2012.

Nondurable vs. Durable Power of Attorney

There are two types of power of attorney. A nondurable power of attorney grants an agent authority to act for a principal only as long as the principal is alive and has his full mental faculties. As a result, if someone gives a family member a nondurable power of attorney but becomes incapacitated, the agent loses his power. A durable power of attorney also ends at the principal's death, however, it grants the agent the authority to act for the principal even if he is incapacitated. What qualifies for incapacitation is either defined by the law of the state where the power of attorney was drafted or by the document granting the power of attorney.

Ready to appoint a power of attorney? Get Started Now

Fiduciary Duties

An agent with power of attorney owes his principal a fiduciary duty. This duty requires that when using the powers granted to him under the power of attorney, the agent must put the principal’s needs before his own. This means that the agent cannot use his power to enrich himself in a way that hurts the principal. The agent is generally required to make the choices that the principal would make if she could.

Abuse of Power

Power of attorney abuse generally falls into one of three categories: the agent acts in a way that exceeds the authority granted by the power of attorney; the agent executes a transaction that benefits himself and not the principal; or the agent acts in a way that undermines the principal’s stated expectations and goals. An agent may abuse his authority either because he does not understand his responsibility or because he does understand but wants to personally profit. Examples of actual actions that could represent abuse include making inappropriate gifts of the principal’s property or misusing his funds. A person may also use his influence to coerce an incapacitated relative to sign a power of attorney, granting the person agency for the relative.

Legal Remedies

It may initially be difficult to determine if an agent of an incapacitated family member is abusing his power of attorney since the family may be not in position to observe the agent’s actions. As a result, abuse is often not discovered until after the relative passes away. When the family does discover abuse, it can sue the agent to recover what the agent took by alleging the agent violated his fiduciary duty. The family can also press criminal charges against the agent. Depending on what the agent did, he could be guilty of exploitation, embezzlement, fraud, larceny, money laundering or theft.

Prevention

There are some steps that a principal can take to prevent abuse by an agent. The first is to draft the power of attorney well in advance when the principal still has a clear mind and to limit what the agent can do to very specific areas. One area in which a principal might want to limit an agent’s authority is the principal’s retirement and pension accounts. A principal may also want to contact the entities that control his financial assets, such as his bank, and let them know to what degree the agent can act on his behalf.

Ready to appoint a power of attorney? Get Started Now
Does a Power of Attorney Have the Right to Change a Living Trust?

References

Related articles

How Can I Prove My Uncle Is Misusing His Power of Attorney?

A power of attorney allows one person, the principal, to give authority to another person, the agent, to act on her behalf. The principal gives the authority in writing and on a document known as the power of attorney. An agent is supposed to follow the principal's directions, act in good faith and not overstep the authority the principal gives him. If your uncle is misusing his power of attorney and hurting the principal, you'll need to determine what powers he has and review your state's laws to prove it.

Can a Person With Power of Attorney for Another Profit From the Sale of a House?

A power of attorney is created when a person -- the principal -- creates a document giving authority to a third party – the agent – to accomplish tasks on his behalf. The agent’s authority can be very broad or narrowed to just one area. When an agent has authority to sell the principal’s home, he must act in the principal’s best interests.

Can a Judge Take Away Someone's Durable Power of Attorney?

An agent under a durable power of attorney has legal authority over someone else's finances or medical care decisions. But he is also a fiduciary, held to the highest duty of care known to the law. If the agent violates that duty of care by failing to act in the best interests of the principal, a court can take away his authority and hold him accountable.

Related articles

Can a Power of Attorney Give Away a Life Estate?

A power of attorney is a written document wherein a principal grants an agent the power to take action on the ...

What Is Financial Power of Attorney Abuse?

When you, as a principal, create a power of attorney, you give your agent a significant amount of authority to conduct ...

How to Determine a Misuse of Power of Attorney

There is a significant danger to an agent misusing his power of attorney because it may be hard to observe. The power ...

The Responsibilities of Medical Durable Power of Attorney for the Elderly

If a person becomes incapacitated, perhaps because of a mental illness like dementia, he can no longer make health care ...

Browse by category