In the wrong hands, a power of attorney is a license to steal. It is usually released to a child when dad or mom is impaired and unable to manage his or her affairs. The POA typically grants carte blanche control of the parent’s finances and is a ripe invitation for abuse. Indeed, almost every case of elder exploitation in my practice has involved POA abuse. I have seen POAs used to build houses, buy cars, fund trips, and pay for every manner of extravagance. All too often the theft is not discovered until mom or dad passes and the rest of the family discovers that the estate is much less than anticipated – of course, in these cases, the estate plan often benefits the child agent preferentially, if not exclusively.
While the release of a POA will always carry risks of exploitation, planners might consider drafting them to require the agent to render periodic accounts to counsel or other family members. For example, my durable POA provides, “My agent shall be transparent in the management of my affairs and provide reports no less than annually to [names of family members], accounting for all expenditures, investments, distributions, and other transactions undertaken.” If POAs contained such provisions and all involved were informed of the accounting requirements, perhaps some POA abuse could be avoided.