A power of attorney document is an important estate planning tool if you face an incapacity during your lifetime. It allows you (the “principal”) to name someone (the “agent” or “attorney in fact”) to step in and handle your affairs when you can’t. You may do this, for example, in preparation for a time when you may become mentally or physically incapacitated or simply for convenience.
A financial power of attorney handles financial matters, and a health care power of attorney manages medical decisions when you can’t. However, it is (if you’ll excuse the pun) a “powerful” document giving someone control over your money and your life.
While agents can provide valuable help, it is possible that they can abuse a power of attorney. A Malibu doctor, unfortunately, found this out when actress Anna R. Moore and hairdresser Anthony D. Flores allegedly stole $3 million with a fraudulently obtained power of attorney.
Types of Power of Attorney Documents
Again, you can draft a financial power of attorney for financial decisions or a health care power of attorney for medical decisions.
A durable power of attorney refers to a power of attorney remaining effective during the principal’s incapacity. For a power of attorney to be “durable,” it must contain language such as “This power of attorney shall not be affected by subsequent disability or incapacity of the principal or lapse of time,” or similar wording.
A springing power of attorney only becomes effective upon a specific date or event — for example, if you become incapacitated or must leave the country.
An agent can only act on behalf of the principal for the specified time period and can only use the authority granted by the principal. So if you allow your agent to help with health care decisions, they cannot access your bank account or file your taxes.
Agent’s Duty of Care
An agent has a fiduciary duty to act in the principal’s best interests. If there is a breach of fiduciary duty, such as self-dealing, the agent may face civil and criminal charges. For example, if your agent uses your money for their own benefit, that is embezzlement.
While power of attorney abuse is rare, it still occurs, especially with criminals.
Abuse of Power of Attorney
The Malibu doctor mentioned above suffered from mental illness and lost the ability to care for himself. The couple befriended the doctor and moved in with him. Additionally, they provided the doctor with marijuana and LSD and convinced him to let Flores control his finances.
Flores obtained the power of attorney through fraud. When the doctor was arrested and jailed due to a mental episode, Flores agreed to get him out of jail if he signed a power of attorney giving him control over his money. Flores lied to the doctor, telling him if he signed it, Flores would rescind it once the doctor was free. Once the doctor was free, however, Flores did not step down as agent and subsequently stole money from him.
The couple faces 12 criminal charges, including wire fraud, aggravated identity theft, and money laundering. Also, California has additional penalties for elder or dependent adult financial abuse.
How To Prevent Power of Attorney Abuse
Most cases of power of attorney abuse occur when an agent has access to bank accounts and credit cards. However, there are ways to protect yourself from POA abuse.
Create a Power of Attorney
The first lesson is to make a power of attorney document and name someone you trust. If the doctor had named someone he trusted as his agent, the agent could have stepped in when the doctor could no longer care for himself. Even if the hairdresser and actress tried to get money from the doctor, the agent in charge could stop them and even get law enforcement involved.
Limit a Power of Attorney
When creating a power of attorney, you can limit the authority granted as well as the time period. For example, if you want someone to handle a real estate transaction for you while you are out of the country, you can draft a limited power of attorney to handle that one transaction. Similarly, you can specify the time period when a power of attorney is effective. So in the case of the jailed doctor, the doctor could have limited the power of attorney to one or two days. After that time, Flores would no longer be in charge because the power of attorney ends.
Revoke a Power of Attorney
Even if you authorize an agent to act in your place through a power of attorney, as long as you are competent, you can always revoke a power of attorney. In this case, the doctor signed a power of attorney to get out of jail. If competent, he could revoke the POA document, and Flores could no longer act as his agent.
You can revoke your power of attorney in the following ways:
- Revoke your agent’s appointment orally or in writing.
- Revoke the agent’s authority by notifying all people and financial institutions with a copy of the power of attorney.
- Create a new power of attorney and revoke any prior power of attorney documents.
And if you divorce, by state law, divorce automatically revokes any designation of a former spouse as an agent.
Challenge a Power of Attorney
Powers of attorney documents are legal documents, so they cannot be enforced if they are obtained through fraud or duress. This would be the case, for example, if someone lied to the principal to get their signature on a durable power of attorney or forced the principal to put them in a decision-making capacity.
Additionally, the principal must have “capacity,” or mental competence, to enter a contract to make a power of attorney. In this case, the doctor was mentally incompetent, so his signature on a power of attorney document is invalid.
You can also challenge a power of attorney document for validity. A power of attorney must follow specific state requirements for validity. In California, a POA must be signed by a notary public or witnessed by two adults who are not the agent or attorney-in-fact.
Family members can contest a power of attorney in court. The family member may be an adult child, parent, or sibling. Some states allow aunts, uncles, and cousins to contest a power of attorney.
If you suspect a loved one is dealing with power of attorney abuse or financial exploitation, contact an experienced attorney in elder abuse law for legal advice.
