Senior Financial Safety Tool Bulletin: Power of Attorney: What is it, and why is it important?

The SFST Bulletin is a monthly electronic publication written for financial professionals. Our goal is to increase awareness of legal issues faced by older adults in our community related to financial exploitation by providing these informative materials to financial professionals. Each month the SFST Bulletin will focus on new and timely topics that affect consumer matters.

Submitted by Melissa Woods, Paralegal

A Power of Attorney is a legal document in which an individual (known as the Principal) gives authority to a third party (known as the Agent, Power of Attorney, Attorney-in-fact); to make decisions regarding their money and property in the event that the Principal is not able to do so.

Four Basic Duties of the Agent:

  1. Act in the principal’s best interest and involve them whenever possible if a decision needs to be made. The principal’s needs should be the priority. The agent should exercise care when making gifts, borrowing or loaning money.
  2. Manage the money and property with care. Agents should demonstrate good judgment and monitor all financial statements.
  3. Keep the principal’s money and property separate. Funds should not be comingled and all documents should be signed properly. For example; ‘John Doe, as agent for Mary Smith’.
  4. Maintain accurate records, receipts and notes (even for smaller expenses). If a power of attorney is changed or revoked, any financial institution or place of business with a power of attorney on file should be notified that the agent no longer has authority to assist the principal.

** Consumer Financial Protection Bureau; Managing Someone Else’s Money: Help for agents under a power of attorney; April 2015.

What can YOU do to deter exploitation and abuse of power?

  • Make sure the bank has seen the original Power of Attorney document (it is okay if the document on file is a copy of the original).
  • Do not allow the agent to act outside the authority granted by the Power of Attorney document.
  • Encourage the principal to enlist a third party to handle accounting and oversight. When a second pair of eyes reviews the financial records, transparency is improved. The dates, nature and amount of all financial transactions should be reviewed and recorded in a timely manner.
  • If the principal is asking for advice on who to select as their Power of Attorney, you can advise them of the following characteristics to avoid:
    • Personal financial difficulties or a history of substance abuse
    • Sense of entitlement or conflict with other family members
    • Limited availability or unwillingness to help when needed
  • If you suspect that someone is not acting in the best interest of the principal and the adult is at risk of abuse, neglect or financial exploitation; contact your local APS office! Social Services Law provides immunity from civil liability to persons who, in good faith, make a referral concerning an adult who they believe may need protective services (Social Services Law 473.6).

The Senior Financial Safety Tool project is supported through a cooperative agreement with the U.S. Department of Justice, Office of Justice Programs, Office for Victims of Crime award number 2018-V3- GX-K024. The opinions, findings, conclusions or recommendations expressed in this Project are those of the author(s) and do not necessarily represent the official position or policies of the U.S. Department of Justice.

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