What Protects Families From Power of Attorney Abuse?

By Stephanie Reid

A power of attorney is a legal status that grants an individual powers to make financial or health decisions on behalf of another person. The person granting the power of attorney is the principal and the individual receiving the powers is the agent. Agents are required to act in the best interests of the principal; however, it is not uncommon for agents to take advantage of the situation by stealing money or unlawfully selling property. It may be possible to safeguard against this situation by using specific language in the power of attorney document or by appointing more than one power of attorney. If the damage has already been done, there are civil and criminal sanctions available.

Limiting the Scope

As a way to avoid power of attorney abuse, the principal may decide to execute a limited-scope power of attorney that does not grant the agent sweeping powers with regard to financial decisions. For instance, the principal may indicate that the agent may only make decisions regarding personal property and personal maintenance but not real property, investments or gifts. The power of attorney document may also contain language limiting the agent's ability to change account beneficiaries, amend a living trust or make donations.

Appointing Co-Agents

A principal may appoint more than one individual to act as agent. This arrangement could serve as a balance-of-powers to ensure no one takes advantage of the power of attorney arrangement. If the agent believes two or more people can work together to monitor the principal's finances and personal matters, it may be advantageous to name co-agents and expressly state in the document that decisions must be made together.

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If the principal becomes aware of power of attorney abuse, he may revoke the arrangement at any time. In most jurisdictions, to take effect, a revocation must be in writing and notarized. If a principal has elected more than one agent, the principal may revoke power of attorney to just one of those agents, without affecting the relationship with the others.

Appointing a Guardian

In most states, once a principal has become incompetent, he cannot revoke a power of attorney. In order to protect the principal from possible power of attorney abuse, another family member, close friend or even a nursing home can file a guardianship petition in order to exercise guardianship over the victim of power of attorney abuse. Once a guardianship is in place, the guardian's wishes trump those of the power of attorney and the guardian may then revoke or terminate the power of attorney on behalf of the ward.

Criminal and Civil Penalties

Depending on the circumstances surrounding the power of attorney abuse, the perpetrator could face criminal charges including exploitation, embezzlement, forgery, larceny, money laundering, theft or any other charge appropriate under the facts of the case. Most states have also enacted sentencing enhancements for crimes against the elderly or incompetent. Possible civil penalties include restitution, damages, costs, attorney's fees and any other appropriate remedies.

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What Happens If an Agent With Power of Attorney Becomes Incompetent?


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Possible Power of Attorney Complications

A power of attorney can be an effective way to delegate responsibility for managing your finances and making health-related decisions when you are no longer able or willing to make these decisions yourself. However, complications can arise from the time the POA is executed up until the point that all duties have been performed by the person you appoint.

Definitions of Durable and Non-Durable Power of Attorney

A power of attorney, or POA, grants an individual (“agent”) the legal authority to make decisions on behalf of another individual (“principal”). The decision can involve legal, financial or health matters. The power of attorney may be limited in scope; it may also be more general, allowing the agent a wide range of legal powers. A durable power of attorney refers to the agent’s authority when the principal is incapacitated.

Penalty for Taking Advantage of Power of Attorney

A power of attorney is a legal status given to an agent by a principal. Under a power of attorney, an agent is able to engage in legally binding conduct on behalf of the principal including buying and selling real estate, making investments, managing assets or entering into contracts. If the agent takes advantage of his power of attorney, he could face civil penalties including restitution of lost money or a judgment for damages and fees. Conduct amounting to a crime could result in incarceration or significant criminal fines.

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