Abuse of Power of Attorney

Power of Attorney Abuse is on the Rise.

A power of attorney is a document that transfers legal authority to another person. The person granting the power of attorney is called a principal who gives another, known as the attorney-in-fact, the written legal authority to make decisions on a specific, narrow, or broad range of topics.

The potential for wrongdoing exists in the power of attorney relationship through fraud, theft, improper transfers, self-dealing, improper gifting, and retitled accounts and beneficiaries. Power of attorney holders can change beneficiary designations and account titles so the heirs are left with little to no inheritance. A power of attorney can also be abused when dealing with life insurance, annuities, bank accounts, joint accounts or pay on death accounts.

Typically, an attorney-in-fact has full authority to perform, without prior court approval, every act authorized and specifically enumerated in the power of attorney. An attorney-in-fact, however, may not amend or modify any document or other disposition effective at the principal’s death unless expressly authorized by the power of attorney to do so.  Therefore, an attorney-in-fact may not change the named beneficiary on an insurance policy unless expressly authorized to do so by the power of attorney.  The law provides that the construction of a durable power of attorney is a matter of law. In construing a power of attorney, the court must look at the language of the instrument in order to ascertain its object and purpose. Powers of attorney are strictly construed and only the principal’s intent is considered when construing the power of attorney, not the agent’s intent.

Because many powers of attorney are so broad in scope, challenging the actions taken through the power of attorney may be frustrating when the face of the document seemingly allows almost any conduct including self-dealing and making gifts to themselves.  Thus, the focus on challenging the creation of a power of attorney should be based on lack of capacity, undue influence, or improper signing formalities. If a power of attorney has been abused by the agent, a basis may exist to sue the agent for the return of money, property assets, or for possible monetary damages.