May 24, 2023 Proving Abuse of Power of Attorney

A power of attorney is a legal document authorizing a person you select to act on your behalf if you become incapable of making decisions relating to your own healthcare or in matters pertaining to your financial affairs, whether or not you are incapacitated. Powers of attorney (POAs) are among the most common legal instruments when an elder or disabled person’s physical or mental limitations prevent them from acting independently.

When someone is granted a power of attorney over another person’s financial assets or healthcare decisions, they assume a fiduciary duty requiring that they act in the best interest of the principal who gave them that power. Unfortunately, despite the highest hopes of the person granting power of attorney, some who are entrusted with a POA betray that trust and convert the principal’s money or other property to their own use.

In this blog post, we discuss the ways in which someone may abuse a POA and what can be done to stop the abuse of power.

Types of Powers of Attorney

There are several types of powers of attorney, each designed to be effective under particular circumstances.

• Limited Power of Attorney
• General Power of Attorney
• Durable Power of Attorney
• Springing Power of Attorney

Limited Power of Attorney — A power of attorney can be extremely limited, authorizing the person named  to act only in a single capacity at a one-time event. For example, someone selling their home can empower their lawyer to sign documents on their behalf during the real estate closing.

General Power of Attorney — A power of attorney can also grant general powers to someone. By granting someone a general power of attorney, you authorize them to sign for you any document you could have signed yourself. A person with a general power of attorney can sign contracts, take out loans, sell property, file taxes, and execute many other legal documents.

Durable Power of Attorney — A durable power of attorney is one that continues to be effective even after the grantor becomes incapacitated. The power enables them to make decisions regarding the healthcare and the financial affairs of the person who empowered them. These decisions could even include determining end-of-life matters for the incapacitated principal.

Springing Power of Attorney — A springing power of attorney only becomes effective upon the occurrence of some triggering event, typically the incapacity of the person (i.e., the principal) granting the power.

How Long Does the Power of Attorney Last?

Once someone is granted a power of attorney, they continue to possess the power to act until one of the following conditions apply:

• The principal who granted the power dies,
• The principal revokes the power of attorney in writing and notifies the agent in writing,
• The POA expires on a date stated in the terms of the POA,
• The agent’s power is successfully challenged in court.

How Someone Can Abuse a Power of Attorney

Unless the POA document limits the breadth of their power, the agent possesses a wide authority to act on the principal’s behalf. If a trustworthy person were given power of attorney, they would honor their fiduciary duty and take great care managing the principal’s finances or healthcare. However, an agent who is either incompetent or dishonest can cause enormous harm to the principal’s interests.

Examples of ways a power of attorney can be abused by the agent include:

• Withdrawing money from the principal’s bank account for the agent’s personal use,
• Incurring credit card debt in the principal’s name for the agent’s own benefit,
• Taking out a mortgage on the principal’s home,
• Changing the names of beneficiaries on insurance policies,
• Hiring  associates with whom they share a commercial interest (self-dealing),
• Failing to pay essential bills (rent, insurance, mortgage or loan payments, taxes),
• Isolating the principal from caring family members or friends,
• Skimping on provisions to care for the principal,
• Neglecting the principal’s deteriorating health, hygiene, and living conditions,
• Involuntarily transferring the principal to a residential care facility,

While the examples just cited illustrate possible abusive breaches of the agent’s fiduciary duty, depending on the facts and circumstances, the elder or disabled individual may also be vulnerable to physical, verbal, and emotional abuse.

Protecting an Elder or Disabled Person from Power of Attorney Abuse in New York

If you believe someone with a power of attorney is abusing their duty to act in the principal’s best interests, there are steps you can take to intervene on the victim’s behalf. Challenging the authority of someone’s power of attorney when the principal is incapacitated requires an action that is filed in court, typically under New York General Obligations Law, Article 5-105.

Challenging the authority of a power of attorney / agent to continue in that role requires evidence that they have failed to appropriately manage the principal’s assets or care needs. This failure may be due to negligence or intentional wrongdoing. Report the facts giving rise to your concerns to an experienced elder law and special needs law attorney immediately.

If sufficient grounds exist to remove the current person with the power of attorney, the elder law attorney can prepare a petition alleging the misconduct. The attorney will gather the evidence to prove that a conservator or guardian should be appointed to replace the agent. Records of bank accounts and other financial transactions can be subpoenaed along with medical records.

Consulting with a New York elder law or special needs lawyer before taking any action is essential. Alleging wrongdoing by the agent without sufficient justification may be defamatory and open the accuser up to civil liability. However, remaining silent if you suspect that someone is abusing a vulnerable person in their charge can endanger the victim’s life.

If a victim is suffering physical, verbal, or other non-financial personal abuse, state law enforcement and social service agencies should be notified to investigate immediately.

How to Prevent Abuse of Powers of Attorney

Preventing power of attorney abuse can be accomplished by acting in advance.

The ideal situation is choosing an individual you know you can trust unreservedly. Additional steps to prevent POA abuse include the following:

• Limiting the scope of the POA agent’s authority to prevent them from
  • changing beneficiary names on insurance or retirement accounts,
  • creating the right of survivorship on accounts to which the agent’s  name is added as POA,
  • conducting certain financial transactions (mortgaging property, incurring large debts, etc.)

A power of attorney document can also require the agent to maintain detailed records of all actions taken on behalf of the principal. Failure to keep those records can be express grounds for the agent’s removal. A third party can also be empowered to revoke the agent’s power of attorney if they fail to comply with the duties spelled out in the document. A POA instrument can also include a monitoring provision to prevent against any abuse of power, breach of fiduciary duty, or other inappropriate behavior by the agent.

Before giving your power of attorney to anyone, speak with a qualified elder law and special needs attorney who can construct the legal instruments that include terms that provide you with protection from any exploitation.

New York’s Elder Law and Special Needs Attorneys

Ely J. Rosenzveig & Associates
Call 1.914.816.2900 or email us at: [email protected]