Powers of attorney that give another person the authority to make financial decisions on behalf of an elder are sometimes described in law as a license to steal. It is shocking when a son or daughter takes advantage of their elderly parent and uses said document to deplete bank accounts or even transfer title to the elderly home.
Broadly speaking, there are two types of powers of attorney for financial matters. The first (and generally recommended) is known as “spring power”. This power of attorney is not effective unless one or more qualified physicians declare, under penalty of perjury, that the elder is mentally incompetent and unable to make sound financial decisions. Only when this medical statement has been obtained does the power “spring into existence” and become effective.
The second type of power of attorney takes effect immediately. No physician is required to be involved before the authorization takes effect.
Any document, placed in the wrong hands, gives authority to the “agent” to handle any and all financial transactions the elder could. This includes opening and closing bank accounts, changing ownership of those accounts, withdrawing money, and even transferring title to the home itself. An unscrupulous “agent” can take advantage of an elderly man with diminished mental capacity quite easily.
The power of attorney requires that it be signed in the presence of a notary public. However, the main duty of a notary is to obtain proof of the identity of the signer. In most states, it is not the responsibility of a notary to assess whether the elder understands the meaning or consequences of the document itself.
Often the perpetrator contacts a notary beforehand and gives a false story of the family dynamics involved. He/she explains why the elder needs to have the power of attorney and then expresses his/her gratitude that the notary is willing to help this elderly parent. The unsuspecting notary is now less suspicious when the old man seems confused when the document is presented for his signature.
Some good news: a power of attorney for finances can be easily revoked if a trustworthy and understanding person discovers the document’s existence (and its misuse). However, the old man often suffers from some form of dementia and does not even remember that the document was ever created. If the elder lives alone and is isolated, no one else can know about the document except the perpetrator.
Simply revoking a power of attorney doesn’t always work either. An unscrupulous “agent” may simply take advantage of the elder again by repeating the process: waiting until the right time (when the elder is mentally vulnerable) and executing another power of attorney.
If this occurs, then it may be necessary to establish a guardianship over the elder’s estate. In California, for example, when a guardianship is created, the power of attorney is automatically terminated. The court then grants authority for someone (a “conservator”) to manage the elder’s finances and account to the court for all money received and spent.
Such powers are a valuable tool when placed in the hands of a trusted friend or family member. But, when placed in the wrong hands, greed can turn it into a license to steal.
