Elder financial abuse is common, particularly by family members.[i] [ii] It has been described as affecting as much as 5% of seniors and being more common than any other form of elder abuse. It is typically pursued by misuse of authority of a continuing power of attorney for property (CPOAP).
The “Continuing” in the CPOAP means the authority continues despite the person becoming incapable to manage property. A CPOAP provides authorization for the appointed attorney(s) to act for another person in specified or all financial matters permanently until the person revokes the authority or until the person dies. CPOAP are most commonly effective upon signing but may also become effective upon a declaration that the grantor is incapable of managing property (postponed CPOAP).
Most CPOAPs result in the appointed attorney(s) having broad power over the person’s financial affairs with no oversight, allowing for the possibility that the appointed attorneys will pursue exploitive behaviours,[iii] a so-called “license to steal.”[iv] This is contrary to the legal requirement that the attorney act as a fiduciary, meaning the attorney(s) is required to make decisions in the senior’s best interest consistent with decisions the senior made or would have made before losing decision making capacity.
Another common challenge is that the senior chooses to bypass estate planning with the help of a lawyer when executing a CPOAP due to the accessibility of do-it-yourself POA forms freely available on the internet. As a result, the senior may not be made aware of the potential for financial abuse by the attorney(s).
Lately, I have seen several cases where conflict and allegations of abuse arose because the CPOAP appoints more than one family member. The senior who executed the CPOAP may have believed that appointing more than one family member as attorneys would provide security from abuse and never imagined that alternatively it would instead provoke conflict and/or abuse.
Risk factors for abuse of authority by family members appointed as attorneys for property include:[v]
(a) Problematic family relationships: typically centering on conflict and enabling behaviours. Conflict can arise out of a sense of perceived favouritism of one child over another, leading to an entitled need to “right the score.” Parents who financially enable their children may unintentionally foster the sense that it is acceptable to take assets as needed.
(b) Trust issues: mistrust between family members can lead to a desire to usurp authority from other attorneys appointed jointly or severally. This may lead to undue influence to revoke and reappoint a CPOAP or to an unwarranted and costly guardianship application.
(c) Unhealthy power dynamics among family members: such as the spouse of the appointed attorney who applies pressure on the attorney to abuse the authority provided by the CPOAP.
What can be done to reduce the risk? When drafting a CPOAP for a senior who is appointing attorneys who are family members, I suggest screening for vulnerability to abuse and undue influence by asking: Are there problematic relationships, trust issues or unhealthy power dynamics among family members? If so, I suggest considering drafting a CPOAP with these safeguards in place:
- Appoint only one attorney to act at a time, along with an alternate.
- Appoint a representative to whom the attorney would provide a regular accounting, regardless of whether the senior executing the CPOAP remains capable or not. The representative could be the alternate attorney, another family member or friend, or a paid fiduciary. Either way, mandated oversight written into the CPOAP would result in enhanced accountability and transparency, thereby reducing the risk of elder financial abuse. If needed, any fees paid to a fiduciary could be seen as insurance against abuse and worthwhile it if it prevents a costly legal fight down the road.
Regardless, I suggest that improved screening for vulnerability to abuse is clearly needed for seniors appointing family members as attorneys for property.
[i] Acierno, R., Steedly, M., Hernandez-Tejada, M. A., Frook, G., Watkins, J., & Muzzy, W. Relevance of perpetrator identity to reporting elder financial and emotional mistreatment. Journal of Applied Gerontology, 39(2), 221–225. 2020. https://doi.org/10.1177/ 0733464818771208
[ii] National Adult Protective Services Association. (2018). Elder financial exploitation. https:// www.napsa-now.org/policy-advocacy/exploitation/.
[iii] Steinman B. A., Vincenti V.B., & Yoon S. Family dynamics and their association with elder family financial exploitation in families with appointed powers of attorney, Journal of Elder Abuse & Neglect. 2020 DOI: 10.1080/08946566.2020.1823290
[iv] Stiegel, L. A. (2008). Durable power of attorney abuse: It’s a crime too. A National Center of Elder Abuse fact sheet for criminal justice professionals. American Bar Association.
[v] Betz-Hamilton, A.E., Vincenti, V.B. Risk Factors Within Families Associated With Elder Financial Exploitation by Relatives With Powers of Attorney. Journal of Family & Consumer Sciences. March 2018 DOI: 10.14307/JFCS110.1.19