Having a power of attorney for finances and for health care is necessary to complete almost any estate plan. Unfortunately, in recent years powers of attorney have become a vehicle for fraud with the appointed agent taking advantage of their new rights. The rise of power of attorney abuse is discussed in a Wall Street Journal article titled, “Power Grab!”.
Power of attorney abuse first gained national attention in 2009 when a woman’s son was convicted of grand larceny after he moved $1 million of his mother’s money into his personal account. Local and state governments have attempted to tackle the problem using legislation and harsher penalties. However, laws that differ from state to state have had little impact in reducing this type of fraud nationally. As a result, banks have begun cracking down on their acceptance of powers of attorney to do banking on someone else’s behalf. Banks have become very specific about the wording in a power of attorney that they will accept and oftentimes have made if their policy to refuse a power of attorney signed more than six months ago. Below are some tips to help avoid both the hassle of having a bank reject your power of attorney and the possibility of falling victim to power of attorney fraud.
- Think about springing. While it is crucial to have the agent of your power of attorney be someone that you trust, some people are just not comfortable giving anyone access to their finances unless necessary. In this instance, a springing power of attorney can be set up so that, unlike a general durable power of attorney in which an agent is given immediate access to your finances, access is not given until it is deemed necessary by two physicians. There is, however, a downside to having to get two doctors to declare you incapacitated before any financial decisions can be made. Chances are, when you actually need your power of attorney you won’t have time to meet with two doctors. In that situation, it is likely that there will be a gap between when the document should be used and when it can be used.
- Keep updating. Renewing your power of attorney can help avoid any hassle when dealing with banks or other financial institutions. This can simply involve resigning your original document if you do not wish to make any changes.
- Check with banks. Financial institutions may have their own specific forms that they want to sign or specific wording that they want in your power of attorney. Make sure that your documents are drafted according to bank policy and be sure to fill out any specific forms the financial institution may have.
- Limit your agent’s power. Your attorney can draft a power of attorney that limits the power your agent has over your finances. Some ways to limit your agent’s power include; being unable to make gifts or change your life insurance beneficiaries.
- Different states, different documents. Many seniors spend time in a different state for part of the year. Set up a power of attorney for each state to be sure that each complies with state specific rules.