Publication: Abuse of Power of Attorney
Preventing and Addressing Elder Family Financial Exploitation
By Virginia Vincenti and Cole Ehmke, University of Wyoming
Below is an excerpt that provides an overview of the publication.
A power of attorney is one of the most important estate planning documents you can create, but it is also one that can be misused.
A power of attorney (POA) allows a person you appoint – your “agent” or “attorney-in-fact” – to act in place of you – the “principal” – for financial purposes when and if you ever become incapacitated. In that case, the person you choose will be able to step in and take care of your financial affairs.
Those with POA are expected to act in the best interest of the principal they represent. Unfortunately, a power of attorney in the wrong hands or with too much power can cause tremendous problems. The largest source of financial exploitation is family members, especially adult children, who were granted POA by their older family member(s) in their estate plans. It often results in reduced wealth, emotional and psychological damage, diminished health, increased hospitalizations, earlier admission to nursing homes, and earlier death. The effects ripple to the broader family through emotional and interpersonal stress, family fractures and estrangements, and weakened family units. Families may feel the effects of stress and financial loss through multiple generations.
While it isn’t possible to entirely prevent the possibility of abuse, there are steps you can take in selecting the agent and drafting the document to reduce the chances.
This publication includes six parts:
1. What is Elder Abuse? Provides definitions of elder abuse and elder financial exploitation.
2. Power of Attorney. Describes POAs and their use, especially durable POAs, and includes suggestions for reducing potential misuse by agents.
3. Elder Family Financial Abuse. Describes the nature and extent of elder family financial exploitation (EFFE).
4. Risk Factors for Elders, Perpetrators, and Families. Lists certain characteristics or circumstances that put elders and families at greater risk of becoming victims, or which increase the likelihood that perpetrators will behave inappropriately when managing someone else’s funds.
5. Elements of Fraud. Describes elements that must be present for fraud to occur: pressure, opportunity, and rationalization. These motivations and justifications might induce someone to steal, and awareness of them can help prevent POA abuse.
6. Responding to Suspected Exploitation. Identifies steps to take if you suspect someone is experiencing financial abuse, including who must report suspected abuse, where reports can be made, and legal actions to take (both civil and criminal) to stop abuse or recover funds.
This publication is for adults of any age who wish to use a POA to plan for potential incapacity. It is also for professionals in financial planning, banking, health care, long-term care, counseling/therapy, religion, and law enforcement, and for those in the judicial system (attorneys and judges).