The legal authority to sign someone else’s name can lead people to do terrible things.
A man with power of attorney removes his elderly aunt from an assisted-living facility, leaves her at home unattended and spends her money.
A nursing home resident with dementia gives power of attorney to a stranger, who pays herself generously from the resident’s funds.
A terminally ill man gives his mother power of attorney and in her son’s final days, she changes the beneficiaries on his pension plan.
Power of attorney can be an easy-to-use tool to allow friends, family and clergy to take care of financial matters for the elderly, deployed military personnel and others.
But it can just as easily be used to exploit those people, when trust is placed in the wrong hands. Unlike conservatorships, which are court-appointed and supervised, powers of attorney come with little oversight and may be granted in minutes using a form downloaded from the Internet.
Abuse “is rampant and we really are seeing a huge increase” in incidents, according to Tara Patet, a prosecutor in the office of the St. Paul City Attorney.
Thanks to efforts by a vulnerable-adult advocacy group, a law passed in April requires those given power of attorney to keep careful records of where money goes, provide an accounting if requested and face liability if they abuse that power.
The form that grants power of attorney will soon reflect those changes. Part of the law goes into effect next month with the rest implemented in January.
‘Speed bumps’ installed
The standard power of attorney form will now have cautionary language that the granter will have to sign off on. “There are touchy issues where people ought to kind of reach a speed bump and make an affirmative decision,” said Iris Freeman, an advocate for seniors and member of the Vulnerable Adult Justice Project (VAJP).
One of those “touchy issues” is referred to as self-gifting, whereby attorneys-in-fact, the people granted power of attorney, take money from the other person’s funds for themselves or their children.
The old form simply allowed the granter to designate whether attorneys-in-fact could self-gift, with virtually no restrictions. Now the granter must check a box and write the names of the people allowed to self-gift.
“We intend that to be helpful in averting those kinds of self-gifting excesses that have been a problem,” Freeman said.
The new form also lists a maximum amount of gift equal to the federal annual gift tax exclusion.
“The more information the attorney-in-fact knows, the less chance the power of attorney will be used incorrectly,” said Laura Garbe, a Minneapolis lawyer with Erickson & Wessman, P.A. and co-chair of the VAJP committee that proposed the changes.
The form’s new language also makes “much clearer statements of the duties that are being granted to the attorney-in-fact,” Freeman said. For instance, the law says they must “act with the interests of the [granter] utmost in mind ... [and] exercise the power in the same manner as an ordinarily prudent person of discretion and intelligence would exercise in the management of the person’s own affairs.”
A third change requires attorneys-in-fact to keep detailed records and, if the granter asks, provide the records to the granter or another person on a periodic basis.