The Dangers of a Durable Power of Attorney
As part of the estate planning process, we often ask our clients to consider signing a durable power of attorney. This document gives another person (the “attorney-in-fact”) the power to do a variety of things on your behalf, such as access financial accounts, transfer property, or defend legal actions.
An “attorney-in-fact” acting under a power of attorney owes fiduciary duties to the individual who executed the power of attorney. This means an attorney-in-fact must act solely in the best interest of the principal and is required to act with good faith, care, and loyalty on behalf on the principal. Acts of self-dealing which benefit the attorney-in-fact are prohibited.
Although most attorneys-in-fact act in the interest of the grantor, these powers are sometimes abused, even by family members. Often, this abuse targets the elderly or others who are unable to care for themselves. In 2020, for example, a California woman was arrested after allegedly stealing millions of dollars from a man with dementia who legally granted her a financial power of attorney.
Improper use of powers of attorney is a serious violation of law. An individual who abuses a power of attorney can be subject to a variety of legal claims including fraud, misrepresentation, conversion, breach of contract, and breach of fiduciary duty.
What can you do to protect yourself? First, if you are granting a power of attorney, you must be absolutely sure that you select a trusted attorney-in-fact who will act in your interest and carry out your wishes. Second, if needed, the document granting a power of attorney should specifically outline those wishes – and any limitations. Third, review your documents regularly, particularly if the relationship situation or dynamics have changed. Conversely, if you have been granted a power of attorney, use your power with good faith in the principal’s interest, and watch for signs of abuse by others.
A version of this post was originally published by Mallory Law Office, LLC.