Power of Attorney
The most dangerous document in the world.
Mistake: not realizing how powerful, and corruptible, a POA can be.
People abuse POAs and take your money. It happens more often than you could ever imagine. I can’t tell you how many calls we get from prospective clients suggesting that a power of attorney document has been misused.
This is why – just like guardianship litigation – power of attorney litigation is almost a sub-specialty of probate litigation.
In case you didn’t know it already, let me say it for you now: people who claim to be your friends or relatives misuse powers of attorney. Your power of attorney, regarding your property and your money. They use and abuse your power of attorney to sign deeds, to change your beneficiaries, to withdraw money from your bank accounts, to put their names on your financial accounts, and to take your money and property.
In Florida, we refer to these actions as “financial exploitation” or “financial abuse.”
There are very strict civil penalties – and also criminal penalties – for financial exploitation of the elderly. When someone misuses a power of attorney, they may be responsible for damages and attorneys fees for having committed civil theft or conversion. Triple damages or punitive damag.es may be awarded, under certain circumstances.
In addition, these financial exploiters who improperly take your money also break our criminal laws, which can land them in jail.
Still, they continue to pop up, time and again, and there appears to be no constraint or limitation on who these financial exploiters are or may be.
Let me at least try to dissuade you from the mistaken belief that the person who attempts to steal from you will be easy to identify – some shady character, unknown to you or to your advisors, lurking in the shadows or working on the Internet or in some semi-secret smoky back room filled with banks of telephones. These financial exploiters aren’t likely to be Chechen rebels plotting a financial cyber-attack from far away. These criminals usually aren’t stealing email lists or financial data to hack into your accounts or credit cards from some third-world safe house, either.
These bad actors are, instead, usually much less conspicuous. Often, they’re hiding right in front of you. And they don’t need to do much at all to steal from you if you grant them power of attorney.
Be wary, then, of people who pressure you to get a power of attorney.
Many times, believe it or not, the financial exploiters you have to watch out for are people you know. Relatives, neighbors, supposed friends, advisers, home helpers, caregivers, relatives of caregivers, boyfriends and girlfriends of nieces and nephews. Yes – even sons and daughters.
You get the picture.
If you think I’m overreacting just to paint a bleak or negative picture and make a point, consider the case of a 94 year-old woman from New Hampshire who had dementia. She also had a police officer who visited her approximately 100 times before her death. The question is: how and why did this unrelated, 94-year-old woman with dementia sign a new will and trust – seven months before her death – supposedly leaving her $2.7 Million estate to this police officer?
The police officer being called out – and whose actions are being called into question here – is the subject of an investigation and an undue influence lawsuit.
Hmmm…not too surprising, actually.
This case, which is going on right now, didn’t actually involve a power of attorney. Still, it illustrates why probate litigation has erupted.
You must remember at all times that POAs can be all-inclusive and very powerful. Unless you limit the power or authority of the POA, the holder of that POA might be able to do just about anything.
POAs are powerful because they’re intended to assist you, to work for you, to help and serve you when you’re unable or unwilling to do the work yourself. As such, they’re intended, by their very nature, to grant great authority to someone. Often, it’s said some POAs are drafted to permit your fiduciary to, “do anything which you could do yourself.”
But – the fact remains that you can also limit a POA. A simple example would be someone trying to purchase or sell a piece of real property. Assume they have to travel. Maybe they’ll be out of the country when they need to sign something. In that case, one might sign a limited power of attorney: limited to time and duration (in this case, for example, only the period of time that one is expected to be away and unavailable), and scope (you can limit the power or authority of your attorney in fact, to be permitted to only deal with the real estate, for example).
But, most powers of attorney, as one part of your overall estate plan, are typically durable powers of attorney, sometimes called “durable general powers of attorney.”
A durable power of attorney is intended to be operative not only right now, but also if you lose competency or, later, lack capacity. This would be the case, for example, if you were hospitalized, or if you lost your ability to think, analyze, and make decisions clearly.
POAs can be a very important part of your estate plan, to assist you with your legal and business affairs. But, if it falls into the wrong hands, your POA can be a dangerous document – a document worth stealing.
One major recurring POA mistake: not understanding or apprehending that your POA – unless you limit it – is probably a very, very powerful document. A second mistake: assuming your POA is effective as soon as you sign it.
Some states may have – Florida used to have it, but doesn’t any more – a “springing” power of attorney. This is only effective – or it only “springs to life” – upon the occurrence of a specific event (such as you losing mental capacity or, for other reasons, being unable to manage your affairs).
You need to find out if your state permits so-called “springing” powers of attorney and whether they’re appropriate for you; conversely, you’ll need to decide whether your POA goes into effect the moment you sign it.
Remember: generally, a POA is valid as soon as it’s signed. I don’t want to scare you, but I can recall learning of a relative who went to the bank the day she got authority under a POA, then proceeded to clean out her aunt’s bank account.
This is hardly what the aunt wanted, needed, or intended.
When it comes to the authority which you give someone under your POA, remember that, absent a very specific need (such as the real estate example, above), a typical durable power of attorney is very broad and very powerful. It’s often all-encompassing. Understand the power which you’re granting by signing that POA. To fail to do so is a mistake.
You also need to understand the specific scope of the POA. If you go to a probate lawyer and ask for a POA,
you’re probably going to get a full-blown, “you can do everything and anything” POA.
Do you want such a powerful POA? Do you need one so powerful? An unlimited POA means that your attorney in fact – the person you’ve entrusted with this authority – can do a lot of things. It’s likewise very powerful.
A “typical” power of attorney might, maybe, permit the attorney in fact to: open and empty your safe deposit box, withdraw your money, buy and sell your property, spend your money, possibly even transfer property or make gifts, or deed real estate to someone.
In Florida, we have a brand new law on powers of attorney. You can now “check a box” for unique and very specific powers or authority which you want to give to your attorney in fact.
Understand, whatever you decide, that a power of attorney can give an awesome amount of power to someone. If you’re not discussing what specific powers you want – or don’t want – your attorney in fact to have, then maybe you should be.
So – back to what I said as we opened this chapter, be wary of people who push you to get a POA, or those who want you to name them in your power of attorney. An attorney in fact is a fiduciary under the law and should be acting only in your best interests.
Although you should trust the person who you’re naming in your POA, you need to know them first – and well – you need to trust them.
Pankauski’s Bottom Line: the power of attorney document is one of the most dangerous estate planning documents in the world when in the wrong hands. Plan your estate so that it only touches someone you trust and isn’t mis-used.