Power grab! Signing over power of attorney to a loved one has ...

A time-tested method to protect assets as people age is starting to blow up on baby boomers.

The ?power of attorney,? a legal arrangement that helps older people turn over management of their finances or other business matters to family members or friends, is emerging as a vehicle for fraud.

Not long ago, such documents were rarely challenged or exploited. But prosecutors and elder-law attorneys say the number of cases of adult children purloining assets from parents? accounts is rising. That is prompting lawmakers to turn their attention to power-of-attorney abuse?often the first step in a swindle.

Banks, for their part, have started rejecting financial maneuvers made under the cloak of a power of attorney, for fear of being parties to fraud.

?Even with perfectly executed power-of-attorney documents, it?s still hard to get banks to honor them because they are concerned about their own liability,? says Rial Moulton, a Spokane, Wash., estate-planning lawyer.

The lesson for anyone entering into a power-of-attorney arrangement: Vigilance is essential. There are ways to bulletproof these legal documents to improve the chances that banks will honor them?and that loved ones won?t misuse them. But it takes careful planning.

Power-of-attorney abuse garnered national attention after the 2007 indictment of philanthropist Brooke Astor?s son for trying to ?unjustly enrich? himself. The son was convicted in 2009 of grand larceny, among other counts, for using a power of attorney to increase his own salary, ultimately siphoning more than $1 million from her. He is appealing the verdict.

There are few comprehensive statistics tracking power-of-attorney abuse per se, but the MetLife Mature Market Institute, a research unit of insurer MetLife Inc., in 2009 put the annual financial loss suffered by victims of elder financial abuse, including exploitation of powers of attorney, at $2.6 billion. It was MetLife?s first such study; it is currently working on a follow-up.

A burst of legislation in the past few years has taken aim at the problem. Sen. Herb Kohl (D., Wis.) in March introduced a bill in the Senate that would create an Elder Abuse Victims Act. A similar bill soon should be introduced in the House of Representatives, says Robert Blancato, national coordinator of the Elder Justice Coalition, an advocacy group pushing to protect older people from abuse.

?People with power of attorney are trusted by those in their care. These are the worst kinds of crimes, ranging from credit-card fraud and forgery to outright theft,? Sen. Kohl says. ?The Elder Abuse Victims Act will help law enforcement to identify and prosecute these crimes more effectively.?

Local regulators and state lawmakers are beefing up legal safeguards as well. New York, for example, has strengthened its protections during the past two years. Now it allows adults to name outside monitors in their power-of-attorney documents, to whom agents must provide regular accounting reports. The state also adopted a much more specific standardized power-of-attorney form.

Regulators started raising concerns about the patchwork of state laws governing powers of attorney even before the financial crisis. In 2006, the Uniform Law Commissioners, a national group of state-law experts, approved the Uniform Power of Attorney Act, which gives bank employees greater protection from civil lawsuits, allowing them to exercise more discretion in deciding which powers of attorney to honor or refuse. Nine states have adopted the law, says Lori Stiegel, a senior attorney with the American Bar Association?s Commission on Law & Aging.

Banks and brokerages, meanwhile, are taking matters into their own hands, imposing tough new hurdles on power-of-attorney claims. Firms have started rejecting documents that were signed more than six months ago, that are from out of state, or for other reasons, say attorneys?making it much tougher for well-meaning adult children to take the reins when their parents? health falters.

?In the old days, a strongly worded poison-pen letter threatening a lawsuit would work,? says Kristen Lewis, an estate-planning attorney with Smith Gambrell & Russell in Atlanta. ?But in recent years, it has not done the trick.?

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Attribution:

Power Grab!
Signing Over Power of Attorney to a Loved One Has Never Been Trickier. Here?s What You Need to Know.
Kelly Greene, Jessica Silver-Greenberg/The Wall Street Journal
May 14, 2011
Senior World Chronicle
http://www.seniorsworldchronicle.com/2011/05/usa-battle-over-power-of-attorney.html

Source: http://www.estateofdenial.com/2011/05/27/power-grab-signing-over-power-of-attorney-to-a-loved-one-has-never-been-trickier/

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