One of the most valuable tools of a good estate plan is the general power of attorney (“POA”).  Powers of attorney are legal documents used by individuals (the “Principal”) to empower someone else to act on their behalf (the “Agent” or “attorney-in-fact”) to take care of financial and property transactions.  The POA is often recommended as a means for planning for the Principal’s incapacity.  When used for this purpose the document on its face or by state law continues if incapacity occurs, and is known as a Durable Power of Attorney.
POAs are powerful documents: they empower the Agent to do all things that the Principal can do with respect to the Principal’s financial affairs. The potential benefits of a POA are substantial.  They include:

1. Promote autonomy and choice,
2. Avoid the need for a court appointed guardian and court supervision of the guardianship,
3. Reduce administrative costs, and
4. Help family members or others make decision on behalf of the Principal in the event of incapacity due to dementia or other causes.

Unfortunately, when placed in the wrong hands, the POA can be a license to steal.  When POAs are abused, families can be torn apart, costly legal battles can ensure and wealth and savings lost.  The courts are replete with cases of people employing POAs to help themselves to someone else’s money.  It is often difficult for the courts to distinguish outright abuse from misunderstanding or incompetence: the difference between criminal fraud and negligence.

POA are subject to abuse because they:
1. The Agent is given broad decision making authority,
2. It is difficult to discover the abuse. The privacy and avoidance of court oversight sought by the Principal means the discovery of the abuse may not take place until after the Principal dies and the money has disappeared,
3. Principals do not fully understand the inherent risks or discount the possibility that their Agent would abuse the power believing the Agent “would never do something like that.”
4. Many victim of POA abuse lack the capacity or financial resources to pursue a challenge against the Agent or those suspecting abuse by the Agent lack the legal standing to bring the challenge.

So, what is a person supposed to do?

1. Make sure you Trust your Agent thoroughly with your finances;
2. Consider requiring Agent to report to other family members or lawyer;
3. Make sure family members who are not named as your Agent know who is named and when they begin acting under your POA so they can look out for misconduct.  (Oversight can help keep people honest);
4. Consult with your attorney as to the various types of General Powers of Attorney to decide which is best for you.

As medical science finds ways to increase our life expectancy, more people will want to utilize POAs to appoint trusted family members or others to handle their financial decision making.  A well chosen Agent and carefully drafted instrument can help stem abuse.