Power corrupts and absolute power can corrupt absolutely. A general power of attorney gives the agent the ability to do virtually anything with the finances of the principal. Although self-dealing is strictly forbidden in this fiduciary relationship, more than a few agents have used their authority to transfer assets to themselves. The law imposes civil and criminal penalties for such conduct.
Power of Attorney: A Fiduciary Relationship
A power of attorney allows a person to control her own fate if she should become incapacitated. In this legal document, she appoints a trusted individual to step in to run her affairs when she is no longer capable. That person owes her the highest standard of conduct described under the law: a fiduciary duty. Fiduciaries must always act in the best interests of their principals and avoid even the appearance of self-dealing.
Penalties for Abuse
Self-dealing under a power of attorney is a clear violation of the fiduciary relationship. Many POA forms allow the principal to state whether self-gifting is permitted, but transferring major assets, such as a house, to your own account can be treated as felony theft under state laws. Since most principals are elderly, abuse is not always reported, and efforts are under way in many states to tighten protections.