Probate Fraud
Power of Attorney: Weapon of Choice

Power of Attorney is the weapon of choice for frauding people out of their homes, businesses, and life savings.

Think twice before signing over your rights. Additionally, keep in mind that while the person you're giving power to may be trustworthy, what about the people connected to that person.

There are two types of power of attorney documents: The general POA and the Durable POA. The latter is for health care. The former is for all else. The Durable can endure after the person becomes mentally incapacitated so that the agent can make health care decisions, while the general is invalid if the person cannot make sound decisions.

The agent cannot personally benefit in any way by use of a power of attorney. It's costly, near impossible to undo the fraud, and your chances for justice are zero, according to the victims and the FBI.

FBI: Policing the guardians and power of attorney fraud

FBI Law Enforcement Bulletin
Feb, 1994
by Mathis E. McRae

People often envision robbery and assault by some unknown individual or physical or mental abuse by a known caregiver as typical crimes against the elderly. These are not, however, the only cases of elder abuse.

One area in which law enforcement has seen an increasing number of complaints is financial exploitation of the elderly through the mismanagement of their income and assets. These incidents usually occur when individuals are given legal guardianship or power of attorney over the victim's finances.

This article discusses what constitutes guardianship and power of attorney fraud and the problems inherent in such cases. It also offers investigators and prosecutors advice in handling these cases. Finally, it suggests ways to decrease the number of financial exploitation crimes.

POWER OF ATTORNEY FRAUD

Powers of attorney may be the single most abused legal documents in our judicial system. Most states do not require any form of accounting as it relates to the use of powers of attorney to handle elderly individuals' finances.

In fact, most transactions do not undergo any court scrutiny, and once powers are conveyed, most banks, financial institutions, and businesses allow unrestricted activity by power of attorney holders over the finances, assets, and income of the elderly conveyors.

The case law relating to powers of attorney, which consists mainly of civil property disputes, recognizes that all transactions involving powers of attorney should be carefully scrutinized to determine if holders acted for the benefit of conveyors or whether exploitation occurred.(3) Unfortunately, no statutes exist that regulate power of attorney transactions in an effort to eliminate fraud.

GUARDIANSHIP FRAUD

Appointed by the court, guardians generally provide care for individuals unable to care for themselves. This often means making decisions that affect every aspect of their lives, including their persons, property, and finances.

The problem with this arrangement, as the Pepper Commission on Aging(1) points out, is that it follows an "all or nothing concept." People judged incompetent lose all of their rights and seldom regain them, unless they can prove total recovery from the conditions that led to their being judged incompetent.

This sometimes leads to individuals abusing their positions as guardians. In an attempt to correct this problem, the Florida Legislature created the Study Commission on Guardianship Law to investigate abuses and pinpoint deficiencies in Florida's system, to receive public input, and to recommend changes in the law.(2) As a result, Florida now uses a flexible adjudication arrangement that allows the court to establish a guardianship tailored to the particular disabilities of the incapacitated person.

Based on their capabilities, individuals can retain some of their rights, while surrending others. In short, the court may appoint an individual as a guardian of the person, the person's assets, or both. Overall, this law allows for closer scrutiny by the court of the manner in which the ward's assets are spent.

Unfortunately, Florida's law is an exception rather than the rule. In many States, guardians have complete control over their charges' lives. Further, while guardians must file reports outlining their income and expenses, these are generally required no more than annually. In the overburdened court system, failure to file these accountings often goes unnoticed, and once filed, they are not closely scrutinized.

INVESTIGATIVE AND JUDICIAL CONSTRAINTS

Many States now have criminal penalties for the financial exploitation of aged adults, although these do not specifically relate to power of attorney matters.(4) Despite this step in the right direction, in some instances, the courts are reluctant to recognize the validity of these statutes, or they narrowly construe them and limit their usefulness.

For example, in State of Florida v. Dyer, (5) the defendant, an insurance agent, relying on his elderly victim's limited knowledge of insurance matters, first sold her more coverage than she needed. As their business relationship progressed, he repeatedly changed her coverage until the policies she held were basically worthless. He was charged and convicted of exploitation.

On appeal, the court held that this case did not meet the test of the State's exploitation statute, in that the allegation did not involve the mismanagement of another's funds. By its decision, the court implied that it would require that the exploiter be one who manages the funds of another as a fiduciary, or trustee, even though the statute reads "use |emphasis added~ or management of an aged person's...funds...."(6)

This law has also been attacked on constitutional grounds at the trial court level. In the State of Florida v. James Cuda,(7) the court struck the word "improper," calling it "unconstitutionally vague." The statute reads:

"Exploitation means, but is not limited to, the improper or illegal use or management of an aged person's or disabled adult's funds, assets, or property, or the use of an aged person's or disabled adult's power of attorney or guardianship for another's or one's own profit or advantage."(8)

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