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Tuesday, June 27, 2006

Is a Durable Power of Attorney a "License to Steal"?

A June 5, 2006 BusinessWeek article discusses whether a Durable Power of Attorney is a "License to Steal" from seniors.

In that case, an 87 year old woman had named her son as her attorney-in-fact and a few years later, a few hundred thousand of her hard-earned dollars were now in her son's account - without her permission! The son had "a license to steal", and he used it!

Apparently, "80,000 such cases were reported last year, and more than two-thirds of the victims were defrauded by someone close to them." This is frightening news. What can be done to avoid such situations?

The article suggests that "it's best to start planning before a senior becomes unable to manage the finances. Document in writing such issues as who will have durable power of attorney, who will oversee the accounting of the finances, and what needs to be done if a problem arises. Too often these questions are confronted in times of crisis, and by then it may be too late." Your elder law attorney can help facilitate this entire process to take the stress off you or your loved one.

BusinessWeek suggests: "To prevent such abuse, hire a lawyer to customize the document, recommends Loewy. Make sure it explicitly states what bills and other financial transactions you want the agent to handle. Some states allow agents to make financial gifts to themselves without limit or restriction. Carefully review or delete these clauses.

Insist that the agent not commingle his or her own funds with those of the person granting power of attorney. It makes it easier to monitor the finances. Another safeguard is to notify the bank of any monthly bills to be paid by the agent with power of attorney. Have the bank agree to to alert another family member if there is an attempt to withdraw additional funds.

Even a well-drafted power of attorney is not foolproof. To add additional protection, assign a third-party, preferably a lawyer or other nonfamily member, to review all spending and monthly financial statements."
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