More and more seniors are falling prey to fraud through a vehicle that you might not suspect at first. The durable power of attorney is a proven instrument that is extremely helpful in managing the assets of people who do not have the mental faculties that they once had. By giving someone they trust legal permission to access bank accounts, perform financial transactions and even sell real estate, the durable power of attorney can drastically reduce the legal costs of winding down an elder relative’s financial affairs as they near the end.
Unfortunately, many elderly are finding that the sons, daughters, nieces and nephews that they thought they could trust are instead swindling them; sometimes for millions of dollars. I personally think this is a growing concern for two reasons:
- The previously mentioned growth in the number of people needing to use Powers-of-Attorney; and
- The increasingly difficult financial positions the younger generations are finding themselves in.
This second point doesn’t excuse the behavior, but it certainly needs to be kept in mind when choosing who you trust your financial affairs to. If your niece is having problems paying her bills, but your grandson is financially sound, it might be best to go to the person who doesn’t need the money. They might not be as tempted to tap the funds that aren’t theirs.
Another side-effect of this growing fraud is that more and more financial institutions are shying away from accepting these legal instruments. They would prefer to pay the legal bills in a court battle than to risk being a party to fraud. To them the potential liabilities, including bad publicity, simply outweighs the costs of litigation. It’s cheaper for the banks to ignore the power-of-attorney than to be liable for any potential fraud.
The article lists several ways to limit potential fraud, all of which I highly recommend:
1. Get it early. I highly recommend executing a durable power-of-attorney with springing powers. This allows a person to complete a power-of-attorney while he or she has full use of his or her faculties, but it will not take effect until a particular event or action occurs. This is typically defined as being diagnosed by a doctor as being incapacitated.
2. Check it often. A power-of-attorney, like any estate planning instrument, should be checked and updated often. This isn’t just to keep me in business. Circumstances change, finances change, the law changes. It is also important to update a power-of-attorney because banks and other financial institutions are more likely to reject a power-of-attorney, especially if it is more than a year old.2.
3. Control the power. The statutory durable power-of-attorney lists several specific powers and limitations. This does not mean, however, that the power-of-attorney is limited to these alone. It is important that you be very specific with the amount and types of powers that you are signing over. I highly recommend allowing gifts, paying bills. It is also possible to require double-checks on the powers, including requiring an over-seer or trustee to approve of certain transactions. Depending on circumstances it may also be important to divide the powers between different individuals who are unlikely to collude.
One of the most important things you need to be aware of is simply to be prudent. Be careful who you name as your attorney-in-fact, what type of powers you give them and who you have draft your power-of-attorney.
I highly recommend reading the article, which you can find here. Should you have any questions you can always call me at (214) 519-8448 or email me at counsel@joshuatisdale.com.
