Power of Attorney – The Basics
A power of attorney (POA) is a legal document that provides authorization for a designated person (an agent) to make business, financial, or medical decisions on behalf of another person (the principal). This is often used in cases when someone becomes incapacitated or has a disability that may affect decision-making.
When used properly, a POA can be a great tool for seniors who need help making decisions or are unable to do so, but it can also be abused. According to the MetLife Mature Market Institute, Americans lose approximately $2.9 billion per year due to multiple types of financial abuse, and this is expected to increase as more baby boomers get older. To make matters worse, 34% of these abusers are family members, friends, or neighbors.
Getting a POA is often necessary for many seniors, but what can you do if you suspect that your agent is acting fraudulently toward you or your older family member? To start with, it’s important to understand the different types of POAs.
Types of Powers of Attorney
General Power of Attorney — This allows the agent broad power to make any financial, legal, and business decisions for the principal, including entering contracts, buying and selling property, and paying bills.
Durable Power of Attorney — This contains a clause that keeps the POA active if you become incapacitated.
Special or Limited Power of Attorney — This limits the agent’s powers to a one-time event or financial transaction, such as purchasing a home. It expires when the transaction is completed.
Springing Power of Attorney — This becomes active only when a specific event occurs, such as when the principal becomes incapacitated.
Medical Power of Attorney — This authorizes your agent to make medical decisions for you if you are unable to do so.
Ways Someone Can Commit Fraud
There are several ways that agents can abuse their power when using a POA. They are:
Identity Theft — This occurs when the agent opens credit lines or takes out loans in the principal’s name.
Fraud and Forgery — This occurs when the agent commits welfare fraud or tax fraud in the principal’s name or changes estate or life insurance beneficiary designations for the principal.
Embezzlement — This occurs when the agent writes unauthorized checks either to the agent or others or uses the principal’s assets for personal gain.
Medical Abuse — This occurs when an agent makes medical decisions against the wishes of the principal, often with the purpose of financial gain. This includes preventing appropriate medical care, committing an elderly principal to a nursing home against the person’s wishes, or making unnecessary medical purchases.
Breach of Fiduciary Duty — This occurs when the agent makes decisions that go against the principal’s best interests, including the transfer of property and financial transactions.
Ways to Prevent Fraud
There are things you can do to help prevent POA abuse or fraudulent activity. These include:
- Hire an estate planning attorney to draw up your POA long before you need it. Your attorney will create this document with your interests at heart and can hold onto your POA until you need it.
- Choose someone you know well and trust to make important decisions for you.
- Avoid giving POA to financial advisors who may not act in your best interests.
- Do not release the POA until you absolutely have to.
- The principal should retain access to medical and financial records.
- Think about freezing your credit report to prevent anyone from securing loans in your name. You can “thaw” it later if you need to apply for credit.
- Looks for signs of suspicious activity, such as secrecy, failure to communicate, a drastic change in the agent’s financial situation, or unexplained expenditures.
Steps to Take if You Think You or a Family Member are a Victim of POA Fraud
Check bank statements and financial records for evidence of fraudulent activity. If you see any suspicious activity, it’s important to act right away. Your attorney can help you evaluate the situation and advise you on your legal options.
At some point, you or a loved one may need to have a POA created, so you should choose an agent carefully. But even if you choose the person you think is the best for the job, there may be a possibility that abuse could still happen. By taking steps to prevent fraud and consulting an estate planning attorney way ahead of time, you can reduce your chances of becoming a victim of financial abuse of fraud.
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Author’s Bio – Steve Howards
Steve has been writing legal-centric articles for several years now. He started working with the personal injury attorney law firm Herrig & Vogt in 2019 as the Content Marketing Manager, which has allowed him to expand on his writing in personal injury, family law, and much more. Steve strives to offer the public advice on various laws covering a variety of practices.
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