The power of attorney document is a staple of any estate plan. This valuable document gives another individual the power to make financial or medical decisions on your behalf. However, many elder fraud experts have another name for the power of attorney- a license to steal.
Elder financial fraud is the illegal or improper use of an older adult’s property, assets, or funds. The problem is larger than many people believe. A June 2011 analysis done by The Metlife Study of Elder Financial Abuse reported that victims of elder fraud lost $2.9 billion in 2009. “Most victims were between the ages of 80 and 89, lived alone, and required some level of help with either health care or home maintenance.” ("Metlife Study of Elder Financial Abuse").
Elder fraud and the power of attorney
In 2013, many public service campaigns were initiated aimed at preventing scams created by strangers that target the elderly. Unfortunately, the abusers are often closer to home. Metlife’s study found that a third of all victims had a personal relationship to their abuser; 34% of victims reported that the abuse originated from a family member, friend, or neighbor. The power of attorney is the tool often used by these culprits. In fact, a November 2012 report conducted by the Government Accountability Office listed the agent of a power of attorney document as a type of potential abuser whose actions are hard to control.
Consider the story of 91-year-old John Potter, first reported by ABC News. Mr. Potter is currently litigating to keep his daughter, Janice Cotrill, from evicting him from his own home. Back in 2004, Mr. Potter gave a general power of attorney to his daughter. He never dreamed that she would abuse it. But his daughter, engaging in a definite misuse of her power, conveyed a deed to the one-story home to herself. In 2010, Mr. Potter learned of the conveyance and immediately transferred the power of attorney to his granddaughter, but the damage was already done. Potter won in Vinton County Court, however the appeals court overturned that decision, stating that the four-year statute of limitation for this type of claim had already passed. Essentially, Mr. Potter had missed his window to bring accusations against Janice for breaching her fiduciary duty. An eviction hearing took place on June 12, 2013 and Mr. Potter was forced to leave his home.
How can you use the power of attorney and still protect yourself?
The power of attorney document is an essential piece of an estate plan, despite its potential pitfalls. Should you become incapacitated without a power of attorney, your family will have to petition the court for guardianship. The process is costly, lengthy, and there is no guarantee that the court will appoint the same guardian that you would have chosen for yourself.
When drafting a power of attorney, it is crucial that you remember that you get to designate which powers the agent does and does not have. For example, you may decide that you do not want your power of attorney to make gifts on your behalf. This means that the agent cannot gift your home or your car to themselves, or their spouse. You could add an additional level of safeguard by designating a secondary agent who is responsible for reviewing and agreeing to all actions made by the primary agent.
However, the best advice for creating a successful power of attorney is to only designate an agent that you trust completely. Once you have made a designation, make sure to revisit the decision every few years. A change in circumstances may impact someone’s suitability for the role of agent. For example, a family member might no longer be suitable for the role if they have fallen into a lot of credit card debt or they have encountered other financial hardships.
How can I protect my elderly loved ones?
You can protect your loved one by monitoring their bank accounts for suspicious activity. Additionally, you can suspend their credit report, thus making it harder for scam artists to take out loans or open credit cards in their name. If you suspect that a loved one’s agent is not acting in good faith, you should immediately contact an attorney. The attorney can help you to revoke the power of attorney, recover stolen money and assets, and potentially file a lawsuit against the former agent.
Fortunately, North Carolina provides the public with several tools to stay current senior scams. The North Carolina Division of Aging and Adult Services keeps an ongoing catalogue of Senior Fraud Alerts. If you have concerns about a senior that may be the victim of elder abuse, you can find more information on the North Carolina Department of Justice Attorney General website.
Have additional questions or concerns?
If you have any additional questions about preventing elder fraud or creating a power of attorney, please contact Carolina Family Estate Planning at (919) 443-3035 for a free phone consultation, contact us online, or attend one of our free workshops. You will discover the next step, and at a minimum, we’ll point you in the direction of resources that can help you. There is no obligation to you.