Limiting Power of Attorney Abuse

Written By: Attorney Jeffrey A. Marshall CELA* 

Originally published in the Lock Haven Express & Hazleton Panorama (April 2006)

A power of attorney is a legal document through which you authorize someone to act on your behalf.  A power of attorney allows you to decide who will be authorized to make decisions for you in the event that you are ever incapacitated.  You specify exactly what actions your Agent will be allowed to take on your behalf.  

For many of us, there is no legal document that has the potential to become as important in our lives as a power of attorney.  In the event of our incapacity, a power of attorney can help ensure that our desired decisions will be made for us by the right people at the right time. A well-drafted power of attorney will increase the likelihood that our values will be respected and our intentions and goals will be pursued despite our future incapacity.

Powers of attorney are easy to implement, relatively easy to understand and use, and inexpensive to create.  This makes them an exceedingly valuable planning tool.  Unfortunately, they can also be exceedingly dangerous and, if they get in the wrong hands, can become instruments of financial abuse and exploitation.

The danger of abuse is particularly acute when the document includes the authorization to make gifts. Giving your agent the power to make gifts on your behalf may become critical to protecting your estate from taxes and health care costs.  Asset protection planning often requires divestiture of your assets.

But gifting powers can also be used by your agent to benefit parties favored by the agent in contravention of your goals. You should consider this potential for abuse and have your lawyer incorporate appropriate protections into the document.

Common protective provisions include (1) naming joint agents, (2) requiring approval of third parties for certain actions, such as gifts, (3) limiting the persons to whom gifts can be made, (4) requiring equal treatment among your intended beneficiaries if transfers are made, and (5) requiring the agent to file regular accounts or other reports with third parties.

A power of attorney is an invaluable legal tool.  Be sure to take your time when you have one prepared and make sure that your document will protect you. 

Jeff Marshall is Certified as an Elder Law Attorney by the National Elder Law Foundation and is the author of Elder Law in Pennsylvania. He is the managing attorney of the Elder Law Firm of Marshall, Parker & Associates with offices in Jersey Shore, Williamsport, Wilkes-Barre & Scranton.  He can be contacted at webmail@paelderlaw.com.

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