Financial Power of Attorney Abuse: Warning Signs and Legal Remedies to Protect Your Loved Ones

When Trust Becomes Betrayal: Recognizing the Hidden Dangers of Financial Power of Attorney Abuse

A power of attorney document is meant to be a safety net—a legal tool that ensures your financial and personal affairs are managed by someone you trust when you cannot do so yourself. However, this essential estate planning instrument can become a weapon in the wrong hands. In the hands of a financial predator or a greedy family member, a power of attorney can be used to secretly steal money and assets, readily bypassing the normal safeguards that financial institutions use.

Understanding the Scope of the Problem

According to the FBI, fraud and financial abuse of senior citizens is a $3 billion loss nationwide. Power of attorney abuse represents a significant portion of this staggering figure, affecting vulnerable individuals who have placed their trust in agents who are supposed to act in their best interests. As an elderly or chronically ill adult, power of attorney abuse from a trusted loved one may result in financial losses, compromised estate plans, and emotional trauma.

Critical Warning Signs to Watch For

Recognizing the early warning signs of power of attorney abuse is crucial for protecting yourself and your loved ones. Here are the key red flags that should raise immediate concern:

Financial Red Flags

  • When the agent is unable to keep the principal’s money separate from their own
  • Unexplained withdrawals or transfers from the principal’s bank or investment accounts, and when the agent is unwilling to share details about the principal’s financial situation
  • Filing credit card or loan applications in the principal’s name without their knowledge or consent, which can lead to the principal becoming over-indebted, leading to long-term financial implications
  • Property is transferred to the agent or is sold without the principal’s permission, and the agent is buying big-ticket items for himself or herself

Behavioral Warning Signs

  • The agent becomes overly secretive about the principal’s finances, may avoid answering questions or providing information about the principal’s accounts or investments, and may also refuse to share information related to the principal’s financial affairs with family members or friends
  • The agent isolates the principal from family and friends
  • The agent neglects to pay the principal’s expenses, such as medical bills, rent, or utility bills, and the principal may start getting notices about late payments, or creditors may begin calling to demand payment
  • The principal appears uncared for even though care has been arranged

Legal Remedies and Protection Strategies

When power of attorney abuse is suspected or confirmed, several legal remedies are available to protect the victim and recover stolen assets:

Immediate Actions

If you do find evidence of abuse, you can contact law enforcement or file a petition in court to get the authorities involved. For elderly victims, family and friends can report it to Adult Protective Services, a victim services agency for the elderly, which can investigate and stop the abuse.

Civil Legal Remedies

There are several legal remedies available to the victims of power of attorney abuse, both in civil law and criminal law. The best way to maximize your chances of recovery is to seek the counsel of an attorney who has experience handling these kinds of claims.

Victims may be entitled to significant compensation. Where a plaintiff can prove through clear and convincing evidence that an agent has engaged in any of the behaviors above, the plaintiff is entitled to recover attorneys’ fees and costs in addition to all other damages available by law, including damages of twice the amount taken from the senior.

Revocation and Court Intervention

If you are unhappy with your POA and you are mentally competent, then you can simply revoke the POA in the presence of a notary to end it. On the other hand, if a person who is incapacitated has a POA, and the designated attorney-in-fact is allegedly abusing them, then a competent adult, whether that be the principal’s relative or their friend, can contest the POA to try to have it revoked.

Prevention: Your First Line of Defense

The most effective strategy against power of attorney abuse is prevention through careful planning and selection of agents:

  • When choosing a power of attorney, “trust is more important than anything else—more than financial experience, than accounting experience”
  • Avoid naming anyone who has financial problems, addictive behavior, relationship problems, legal problems, a history of lying or avoiding responsibility
  • You can name co-agents to avoid giving too much power to just one person. If you do this, though, make sure the power of attorney document states that the agents can act independently of each other

The Role of Professional Legal Guidance

Working with experienced estate planning attorneys is essential both for creating robust power of attorneys and addressing abuse when it occurs. Fratello Law, with offices in Smithtown and Syosset, New York, understands the complexities of these sensitive situations. Planning peace of mind with experience and compassion, every client is unique and we take the time to understand our clients’ individual needs. At Fratello Law, we love building lasting relationships with clients that span generations!

Taking Action When Abuse is Suspected

It’s crucial to investigate signs of power of attorney abuse as soon as they appear in order to safeguard the victim’s rights, restore their autonomy, and ensure financial stability. If you suspect that the person appointed as your or your loved one’s agent is misusing their authority, it is important to act quickly.

Remember that protecting loved ones or vulnerable individuals from exploitation is not just a legal matter; it’s a moral imperative. The power of attorney is a tool for help, not harm. By staying vigilant, recognizing warning signs, and taking swift action when necessary, we can help ensure that these important legal documents serve their intended purpose of protection rather than becoming instruments of exploitation.

If you suspect power of attorney abuse affecting you or a loved one, don’t wait. Contact qualified legal professionals who can help you understand your options and take the necessary steps to protect your rights and recover any losses. The sooner action is taken, the better the chances of limiting damage and holding abusive agents accountable for their actions.