When you grant financial power of attorney to an agent, be aware of the following risks:1. Your agent can sell your property, including your house, personal property, vehicles, and investments.2. Your agent can engage in transactions with your assets that benefit him financially. He can also compensate himself, reimburse himself for expenses, and in some cases make gifts to himself or other heirs.
3. Your agent can hire third parties and incur expenses that must be paid from your assets. This can be done in a way that benefits the agent and may not be in your best interest.4. Your agent can liquidate your bank accounts, deposit your checks, and collect your income. While these funds should be used for your benefit, this power is subject to abuse. See
inheritance theft.5. Your agent can put you in a mountain of debt. He can take out credit cards, loans, and mortgages in your name. He can also fail to pay your bills, even if you have sufficient assets to pay them.6. There is no government oversight or monitoring of the actions of an agent under a power of attorney. While legal action for breach of fiduciary duty and other causes of action may be brought against the agent after the fact, it is often too late for assets to be recovered. In addition, law enforcement is often too overburdened to pursue criminal cases against those who abuse a power of attorney.7. You may be unaware an agent is misusing his powers, especially if you are seriously ill or incapacitated. See Undue Influence.8. If your health condition warrants nursing home care, your agent can sell your house and sign paperwork to have you admitted to a long term care facility against your will.
Before Signing a Power of Attorney
This page explains some of the risks associated with granting a power of attorney for finances.
In the hands of the right person, a power of attorney offers many advantages to the principal, including a sense of security. In the hands of the wrong person, it can leave the principal penniless and at the mercy of government assistance.
How to Protect Yourself When Granting Power of Attorney
Although there is no way to be certain a financial power of attorney will not be abused, there are several ways to reduce the potential for abuse. If you are thinking about making a power of attorney, or are asked to make one, follow these rules:1. If any person asks you to sign a legal document, even your children, DO NOT SIGN IT UNTIL you have it reviewed AND EXPLAINED TO YOU by a lawyer that represents YOU. Do not rely on the lawyer they had prepare the document, get your own lawyer. A state directory of elder law attorneys is available from the National Elder Law Foundation. This is an area in which seniors are particularly vulnerable to being taken advantage.2. If you have doubts or concerns about granting power of attorney to a certain individual, do not rush into the decision. Consider whether you should follow your instincts. Ask a lawyer about alternatives to
granting power of attorney. Granting financial authority to an agent you don't trust or who may not be qualified is not necessarily better than having no power of attorney.3. Do not grant broader powers to your agent than necessary. You can withhold and limit certain powers by changing language in the document. Tailor your power of attorney form to only grant powers necessary to achieve your estate planning objectives.Note: The risks outlined above apply to a general power of attorney. Such risks may be reduced to some extent by changing the language of your power of attorney with the help of a lawyer.Also, the laws applicable to an agent serving under a POA vary from state to state. Protections that are in place in some states do not exist in others. Therefore, it is important to consult a lawyer regarding your state laws on powers of attorney. See finding an attorney.
While your agent has a fiduciary duty to act in your best interest, an agent can breach this duty. While the agent may be financially liable or even subject to criminal penalties, the agent may not be caught or found out until all your assets are gone.Copyright 2020 Pennyborn.com. ALL RIGHTS RESERVED.
INFORMATION ON THIS SITE, INCLUDING ARTICLES, ESTATE PLANNING FORMS, AND THE ESTATE PLANNING BLOG, DOES NOT CONSTITUTE LEGAL, FINANCIAL OR TAX ADVICE. Pennyborn.com is not a law firm and is not a substitute for a lawyer. Your use of this site does not create an attorney-client relationship. Information on this site is for educational purposes only and may not be accurate, complete or up to date.
For information about Pennyborn.com and how to advertise on this website Contact Us.