How a power of attorney can protect the elderly from financial abuse
The ability to make sound financial decisions often declines with age. To help guard against making poor decisions as well as being exploited, it's important that seniors share financial transactions, decisions, and plans with their spouses, families and financial advisers. To minimize the risk of being exploited, building a team of financial helpers makes a lot of sense. However, this is also easier said than done. Emotionally, it can be difficult to share or ask for outside help. Independence is a high priority among aging seniors. And independence may be associated with continuing to make key financial decisions without consulting others.
There is a relatively simple and inexpensive way to achieve this. It is called a Financial Power of Attorney. However, there is a down side to this in that financial powers of attorney are one of the easiest ways to commit elder financial abuse. Therefore, some caution should be taken when executing this document.
When you choose to sign a Financial Power of Attorney, you are allowing someone else to take care of your financial situation. Assigning power of attorney must be done with a legal form, signed in front of a notary, and possibly in the presence of witnesses, depending upon your state laws.
If you want to handle all of your finances until a time when you become incapacitated, a "springing" power of attorney will ensure your wishes are upheld. This simply means the POA will "spring" into effect when needed. A power of attorney can also take into effect immediately once the document is executed.
There are few circumstances when your loved one should execute a financial power of attorney that gives their agent the immediate authority to make financial decisions but the preferred method is to require that the agent's authority is granted only after you have been determined to be incapacitated. This is usually determined by two different qualified medical doctors who need to declare their diagnoses/findings in writing, under penalty of perjury, that the elder is mentally incompetent and unable to make sound financial decisions.
Although still not foolproof, this requirement gives a great deal of protection against financial exploitation. Any person attempting to exploit the elder must now involve two doctors in order to carry out the financial abuse. It is always possible that the perpetrator will simply have the elder execute a new power of attorney that revokes all prior powers and gives the agent the immediate authority. When family members and friends are actively involved in the elder's life, the potential abuser will have much more difficulty in accomplishing this without being caught.
When the elder has no immediate family or friends, the odds of being financially abused are greatly increased. However, there are still some preventive measures that can be taken to reduce the risk.
Speak with bank personnel and other financial institutions where the elder's money is invested. Show them the power of attorney and explain that its purpose is to protect the elder in case someone tries to take advantage. Point out the added protection that requires two qualified medical doctors to confirm the elder's lack of capacity before the power of attorney is effective. Ask them to red-flag the elder's accounts by placing a computer notation that the bank personnel should question any substantial withdrawals or unusual activity.
In California, banks and financial institutions are mandated to report financial abuse. This requires bank personnel to report any reasonably suspicious activity to local law enforcement or Adult Protective Services. In states where similar laws exist, bank employees will receive some training to identify the signs of financial exploitation in order to comply with their mandated reporter requirements.
Delaying the discussion often results in no action being taken. Then, when the need arises, it is often too late because the elder no longer has the requisite mental capacity needed to execute the power of attorney.
There is no foolproof way to avoid financial exploitation of an elder. However, a power of attorney can be put in place that affords peace of mind that the chances of financial abuse are minimized.
The purpose of this column is to provide general information on the law, which is subject to change. It is not legal advice. Consult a lawyer if you have a specific legal problem.
********** Published: Sept. 26, 2013 - Volume 12 - Issue 24