Law Life: Power of Attorney abuse should be watched with elderly

By Gina Bliss

The Daily Record Newswire

My grandmother lived to be a very old lady. She lived by herself until the very end. She loved talk radio. Grandma didn't believe in prescription drugs and treated all her ailments with herbs. She had a little money in the bank. She wasn't wealthy, but she was comfortable.

Some of my cousins borrowed small sums of money from her and never paid her back. Was that a crime? No, I don't think Grandma had any expectation of repayment when she made those "loans." She didn't have any confusion about those transactions.

I do think it's criminal to take advantage of elderly people when they are confused or need help. In our society, it's shockingly common. It's underreported and often not prosecuted.

A common fraud perpetrated against the elderly is Power of Attorney fraud. One who assumes authority under a Power of Attorney has the legal obligation of a fiduciary. Fiduciary duty requires the agent to act in a trustworthy manner and to make decisions that are consistent with those that the individual made for themselves before losing decision-making capacity.

A principal is the person granting "power" to act on his or her behalf, usually on financial matters, through a Power of Attorney. The agent is acting on behalf of the principal through the Power of Attorney and has fiduciary duty to make decisions that are in the principal's best interest. The Power of Attorney is the legal document establishing the principal/agent relationship.

As our population ages, there will be more Powers of Attorney in effect, and more resulting fraud. The economic downturn has resulted in a greater number of people having precarious financial positions. The opportunity to coerce an elderly relative to sign a Power of Attorney might seem like a license to steal. Often when the agent is a relative, they may think of the money taken as simply an early inheritance. It's actually a breach of fiduciary duty.

I'm doing some forensic work right now for a client alleging improper use of funds and breach of fiduciary duty under a Power of Attorney. Rose, an elderly woman, had a surgery and went to a nursing home to rehabilitate. While there, she signed a Power of Attorney naming one of her sons as agent. Her cognitive abilities declined during her nursing home visit and Rose wasn't able to go home.

The son ran her business, managed several properties, and oversaw her financial assets. The rest of the family became concerned when he sold a property that had been in the family for generations. It was well-known that his mother had insisted that the property should always remain in the family.

Her other children retained an attorney to investigate and a niece took Rose to a geriatric specialist to determine her true state of health. The geriatric physician determined that she was overmedicated and weaned her off most of her medications. Her cognitive abilities returned to normal and Rose left the nursing home.

The work I'm doing for Rose involves tracing the money. She needs to know if her funds were used for her benefit or if her son used her money to provide for his own lifestyle. Did he breach his fiduciary duty?

This is not an unusual case. It is often a relative that takes advantage of an elderly person by using a Power of Attorney. Frequently, even if the elderly person realizes what has happened they will not prosecute. They are embarrassed that it happened to them.

A Power of Attorney is sometimes necessary. It can be an important tool to manage the income and assets for an elderly person unable to handle their own financial affairs. The agent must be trustworthy and there should be an independent third party with oversight. If I were ever in the position of agent for another person's financial affairs, I would insist on third-party oversight.

If you suspect an agent is exploiting or mismanaging an elderly person's funds, you should contact an attorney.

Everyone should be as fortunate as my grandmother. Her cognitive abilities were intact for her whole life. But we won't all be that lucky. Our parents and grandparents might need our help.

----------

Gina Bliss, CPA, CFE, is a senior manager at EFP Rotenberg LLP, Certified Public Accountants and Business Consultants, who specializes in internal audit, fraud audit and forensic accounting. She may be reached at (585) 295-0536 or by email at gbliss@efprotenberg.com.

Published: Wed, May 11, 2011

Comments

  1. No comments
Sign in to post a comment »