Love’m & Hate’m:Powers of Attorney

Sally Balch Hurme, JD

AARP Financial Security

Name the Document!

Name the most useful, helpful, convenient, flexible document around?

Name the most devilish, misused, misunderstood, abused document available?

The Absolutes

Contract between Principal and Agent (or Attorney-in-Fact)

Principal MUST have capacity when signed MUST be voluntary act of Principal Agent NEVER “gets” a POA Agent ONLY has authority to do what Principal

stated Agent must be trustworthy, agent must be

trustworthy, agent must be trustworthy Act of Agent binds Principal Authority ALWAYS ends at death

The Variables

When the authority starts When the authority ends What authority is given

Durable

“…not affected by subsequent incapacity of principal” OR

Words that show Principal’s intent that want powers to be exercisable after Principal’s incapacity

model law Uniform POA Act durable unless expressly

states that terminates at incapacity!

Springing

Sign now but not effective until future event MUST sufficiently define “event” May need or want doctor’s affidavit Properly understood POA is always springing Signing should NOT mean loss of control

Content of POA

Very General “…and do all such other things as I might do….”

Very Specific “Sell my house on March 21 to Mr. Smith”

“Short-form” POAs Checklist of possible responsibilities

Potential problems no matter which do What can or can’t the agent do

Benefits

Promotes autonomy and choice Avoids guardianship Inexpensive to create Maintains privacy of personal choices Personal choice of surrogate Helps family members or others make

decisions on behalf of individuals who become incapacitated due to dementia or other causes.

Agent Limits

What limits Exercise only authority granted Perform acts specifically enumerated Fiduciary responsibilities

How make decisions Make decisions as Principal would have Not “I want to get a POA because Mom refuses to

go to assisted living….stop sending sweeps money….

Principal’s Shoes

Just because Principal has signed a POA does NOT mean Principal can’t continue to act on own

Just because Principal has signed a POA does NOT mean Agent must be consulted, concur, agree, co-sign…..

Agent must be in harmony with Principal A stands in the shoes of the Principal to carry out

the Principal’s wishes

Agent Accountability

How held accountable Always accountable to Principal

Change instructions Change agent

But what happens after incapacity Draft in accounting Court standing

Third Party Acceptance

Doing business with a piece of paper No wonder the lender, bank, brokerage wants to use its

“own” form Third party wants assurance that:

Agent really is speaking for the Principal Principal had capacity when signed

Free and voluntary act No coercion, undue influence Knew what was doing and wanted to do it

Agent has the authority to do what seeking to do

Agent Problems --Problem Agents Fail to carry out Principal’s wishes Exceed authority granted Commingle of funds Coercion in obtaining Principal lacked capacity to sign Exploitation

Case of $1 house underlines importance of power of attorney BRIEN T. BOYCE, Staff Writer08/15/2005

The investigation should reveal how Smith's former care giver, Lori Knotek, came into possession of her home at 24814 Greenview Road that was reportedly bought in Smith's name for $250,000, then signed over to Knotek for $1. ©Daily Nonpareil 2005

Power-of-attorney law left great-aunt powerless to stop theft

By Steve EsackAugust 14, 2005

Three years ago, Arthur Tuerff Jr. accidentally uncovered a secret no one else in his family knew.

Tuerff learned that Betty Wojtas, his 87-year-old great-aunt, was rich. So he visited her modest home in a tough neighborhood near Newark, N.J. He reintroduced himself after many years. He gained her trust and even persuaded her to move to a Pennsylvania nursing home. Then he stole nearly half of the retired office worker's fortune by tricking her, prosecutors say, into giving him control of her $1.2 million savings, using a legal document called a power of attorney.

Copyright © 2005, The Morning Call

Making it harder to steal from family

Scott Daugherty - The Capital

February 21, 2008

A piece of paper cost Loretta Soustek her life savings.

As dementia slowly claimed the 87-year-old woman's mind in 2001, she signed a power of attorney that gave her niece control over her finances. With that power in hand, Patricia Skrzesz stole at least $449,000 - liquidating her sick aunt's investments and using the proceeds to build a new house for herself and pay off her own credit card bills.

Skrzesz lined her pockets with her aunt's money for five years before anyone caught on to what was happening. Since Mrs. Soustek gave her niece power of attorney, no one questioned Skrzesz when she sold her aunt's investments - including $400,000 in Amoco Oil stock.

Senior citizens can be easy targets for scam artistsBy DANN DENNYThe Herald-TimesMay 30, 2008BLOOMINGTON, Ind.

The elderly woman made a terrible mistake in judgment -- she trusted her daughter.

The woman granted her daughter power of attorney. The daughter promptly deeded her mother's home to herself, mortgaged the home and defaulted on the mortgage.

We represented the mother," said Jamie Andree, managing attorney for Indiana Legal Services. “We helped her keep her home."

The outcome for an elderly couple who yielded control of their finances to trusted family members by granting them power of attorney did not have as happy an ending, Andree said.

"They later discovered that the family members had taken all their money and spent it on themselves," she said. "What they did was against the law, but there's no watchdog agency to make sure the power of attorney you've appointed is not spending all your money on himself."

"Power of attorney documents are available all over the Internet, but there is little knowledge about the rules," Gaal said. "If you're a power of attorney you can't spend the person's money on yourself or intermingle it with your own personal funds. You also have to keep financial records and provide accounting on request. If you don't follow these rules, you can be charged with a criminal offense."

Copyright 2008 Associated Press

Regulators to Speed Probes of Defrauded Senior InvestorsBy JERRY A. DICOLOJune 11, 2008; Page D3

In February, Finra brought charges that could bring enforcement actions against brokers John Mullins and his wife, Kathleen Mullins, for allegedly misappropriating almost $400,000 from 97-year-old widow Esther Weil.

According to Finra, John Mullins served as the victim's financial adviser for more than 20 years and assumed power of attorney over her assets in 2000.

Mr. Mullins allegedly used Ms. Weil's account to pay down $375,000 in a mortgage credit-line account, spent $4,653 on groceries and $11,264 at restaurants and purchased gift certificates totaling $4,000 for a stay at the Four Seasons hotel in London.

The money was returned to Esther Weil, but Ms. Weil died while the matter was being pursued.

© Wall Street Journal

NY Judge Breached Fiduciary Duty, Owes Aunt $163,000

December 30, 2003 By Daniel Wise

Brooklyn Justice Michael J. Garson breached a fiduciary duty because he failed to keep appropriate records while managing the financial affairs of his elderly aunt under a power of attorney, a Manhattan judge ruled yesterday.

Because of the breach, Justice Garson must repay his 91-year-old aunt $163,000.

News accounts have asserted that Brooklyn prosecutors are examining whether a forgery was involved in the creation of the 1997 power of attorney.

© 2008 ALM Properties, Inc. All rights reserved.

online.wsj.com

How to Ensure Relatives Don’t Rip You OffNov. 28, 2007

Rachel Emma Silverman and Ashby Jones

Sadly, Brooke Astor is making headlines again.

According to the indictment in the Astor case, made public yesterday in Manhattan, Ms. Astor's son, Anthony Marshall, abused his power of attorney in order to "unjustly enrich" himself and others. The indictment alleges that while his mother had diminished mental capacity, Mr. Marshall took works of art from her home and used her funds in a variety of ways: among them, to increase his salary, pay expenses related to a Maine property that Ms. Astor no longer used and pay the expenses of a yacht captain.

Copyright ©2008 Dow Jones & Company, Inc.

DAPHNE, Ala., Jan. 12, 2005 - Couple sought in abuse of 80-year-old womanThe grandson (and his wife) of an 80-year-old woman are being sought. Officers freed her Dec. 23 from a room that had been secured with locks, rope, cable ties, and a metal bar. She said she had been locked in the room for about six months. The husband and wife held power of attorney over the 80-year-old woman's legal and financial affairs, Baldwin County Probate Court records show. She would be put in her room in the morning, given a sandwich, and not let out until the evening. . © 2005 al.com

UPOAA

Written by Uniform Law Commission Up to states to enact

Passed Idaho Considered 2008 Indiana, Maryland, Virginia,

Maine, Michigan, Minnesota

UPOAA Protections

New safeguards for incapacitated principal Personal liability to restore value Clear fiduciary standards

Loyalty No conflict of interest

Specified persons can ask agent for accounting or ask court to review agent’s conduct

Duty to keep records Authority to make gifts must be specified

Smokescreen of Legitimacy

Exponentially complicates detection and recovery.

It looks legal It’s hard to detect It’s unlikely to be reported It’s complicated to unravel It’s complicated prosecute if it is ever

revealed