It’s common for aging parents or family members to sign a power of attorney agreement. These legal documents allow a trusted person (the “agent”), usually a close family member such as a child, grandchild, or sibling, to act upon the principal’s behalf when the owner of the estate becomes incapacitated, most often due to age or illness. Unfortunately, there is great potential for powers of attorney to be abused. When an older person is facing incapacity, it’s important to understand the risks and how to prevent financial abuse.
An elderly Florida couple was the target of this type of prevalent crime. The husband, who had Alzheimer’s disease, lived in a nursing home. A man in the couple’s synagogue gained the couple’s trust and passed himself off as their son to the nursing home. He had the husband sign a power of attorney, then transferred their home into his name, had the wife name him as a beneficiary in their will, and cleaned out the couple’s accounts before the rest of the family found out what was happening.
Powers of attorney are meant to give trusted people the legal authority to handle the principals’ financial and health care decisions when they’re no longer mentally or physically capable of making these decisions themselves. In a study, MetLife Mature Market estimated that elderly Americans lose more than $2.9 billion a year from this type of abuse. Powers of attorney are easy to duplicate or forge, making them prime targets for fraud.
In order to protect their assets, financial experts caution people to only name agents they trust, create a clear power of attorney document before becoming incapacitated, and to review the documentation every few years – with the agent’s and an attorney’s help if needed.
Source: Market Watch, “Power of attorney: It’s easily abused,” Elizabeth O’Brien, Mar. 19, 2013