The power of attorney is an essential estate planning tool that allows a specified individual to manage the affairs of an incapacitated person. This tool is equally important for seniors, who often use the power of attorney to give a trusted family member or advisor the ability to help manage their bank accounts, bills and other financial responsibilities as they age. However, as with any position of trust, a power of attorney can be abused and Massachusetts is moving toward creating stricter rules aimed at preventing this form of elder abuse.
Currently, Massachusetts doesn’t regulate the power of attorney and only a signed, notarized letter of appointment is required to create one. Attorneys, as part of a comprehensive estate plan, are able to draft a power of attorney so that the powers granted are strictly defined and limited, but even then there remains the potential for abuse by the power holder.
Now, according to an article in the Boston Globe, Secretary of State William Galvin has submitted a proposal to the Massachusetts Legislature that would bar people with the power of attorney from enriching themselves or otherwise abusing their authority. This general code of conduct currently exists in the spirit of the law but isn’t explicitly spelled out. The new legislation would clarify that those wielding power of attorney must act in good faith and that they have a fiduciary duty to the people they represent to act solely in their best interest.
Under existing law, courts can hear allegations that someone has committed fraud, larceny, or other crimes while exercising power of attorney but there is no clear standard by which to judge a power holder’s behavior. The new rules would give the court more guidance when reviewing estate settlements, and would allow courts to audit decedents’ accounts while the power of attorney was in effect and determine whether anyone benefited unduly.
The heart of the issue that the Legislature is trying to deal with is avoiding self-dealing on the part of the power holder. Often, family members discover suspicious cash withdrawals or other assets missing when they prepare an accounting of an elder’s estate for Probate Court. While this is obviously alarming and harmful to the family, it can hard to prove that the person with power of attorney wasn’t acting within the confines of his authority.
Seniors using a power of attorney should be aware that they can withdraw the appointment as simply as they assigned it — through a notarized, signed letter. Also, alternatives exist to using a power of attorney such as creating a conservatorship. Naming someone as a conservator of your estate gives them the authority to manage your finances like a power of attorney, but conservators must file annual reports with the courts detailing their transactions so judges can hold them accountable. A conservatorship could be a good option for people seeking more oversight.