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Monday, April 18, 2011

Powers of attorney and conflicts of interest

Advice to seniors about appointing someone to act under a Power of Attorney often includes a recommendation that the senior not appoint someone who is in, or could be in, a conflict of interest position. I believe that the concept of conflict of interest is not well understood by people trying to make good choices, and is worth looking at a little more closely.

A conflict of interest arises when the person acting as Attorney might have to choose between what is best for the senior he represents and what is best for himself.  The Attorney is bound by law to what is best for the senior, while human nature will tempt him to do what is in his own best interests.

The fact that a person is the senior's spouse or child does not in itself create a conflict of interest, but potential conflicts can arise in families. Seniors should not automatically choose their children to appoint as Attorney.

For example, David appoints his son Roger under his Power of Attorney. Roger has always wanted to buy David's lakeside cottage, though David has repeatedly turned down the offers because he loves the cottage. Once Roger starts acting under David's Power of Attorney, he knows he has the legal authority to sell David's property and could sell it to himself. It's best for David if Roger doesn't buy the cottage because David wants to keep it, but Roger is tempted to do what is best for himself.

It's always considered to be a potential conflict when a senior wants to appoint a paid caregiver or a business partner. Both of these people have a financial connection to the senior which creates the conflict. The caregiver would be responsible both for setting the price of care and paying the care bills. The business partner might be tempted to make a sale or transaction that suited himself better than it suits the senior.

Financial abuse of seniors by those holding Powers of Attorney is widespread. Too many seniors have seen their life savings stolen, lost or mishandled by someone they trusted to look after the funds. Some of these cases could have been avoided by the appointment of a different Attorney.

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