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Sunday, October 9, 2011

See a lawyer if you're appointed as attorney

As our population ages, more and more people are relying on Enduring (aka Durable, Continuing) Powers of Attorney. This happens because these days we are all living much longer, but there is no guarantee that we will live out those years with full mental and physical faculties intact. The Power of Attorney (POA) document is one that we sign while mentally healthy to allow for someone else to make decisions for us should we lose our ability to do that for ourselves.

The need for Powers of Attorney is huge, but the documents themselves are largely in their infancy. The vast majority of the Powers of Attorney that I see in my work (and I do see a lot of them) are too basic and contain too much generic, boilerplate language to do the job effectively.

The end result of such a great need being met with an insufficient response is a great deal of misuse of the money and property that is supposed to be protected. Financial abuse using POA is growing and will likely skyrocket in the next few years. In some cases, elderly people lose their life savings and their homes and despite a lifetime of careful savings are forced to live entirely on public pensions. In other cases, the wills of seniors are re-written for them, in the sense that the money they wanted to leave to their children or charities is spent by the person acting under the POA, leaving nothing in the estate.

Intentional financial abuse - also known as fraud and/or theft - is enormous, and I will address it many more times in future blogs. Today I'd like to focus on individuals who are appointed under a POA and who, despite good intentions, end up making a huge mess of the job.

I've met hundreds of individuals over the years who think they are doing a decent job of acting as Attorney for their parents, and who have no compunction about describing how they've used some of the parent's money for themselves, lent it to their kids, taken the extended family on vacation at Mom or Dad's expense, invested in businesses ventures or distributed portions of the estate "early". They have little or no awareness of the illegality of their actions or the fact that if they are caught, they can be personally liable to repay any losses. Also lost in this self-indulgent scenario is the devastating emotional cost to the family should siblings have to take the Attorney to court to account for his or her actions.

I'm a strong believer in pre-emptive actions to avoid this kind of potential disaster. My preference is that parents do what they can in their own POA documents to head off problems. A while ago I heard about one solution that I have yet to see in action very often, but which I strongly encourage parents to consider.

That solution would be to require the person named as Attorney under the POA to spend an hour with an estate-planning lawyer learning about his or her role before the Attorney is allowed to act. The requirement would be built in as a condition, so that the Attorney would have to produce both the doctor's certificate showing that the parent had lost capacity and a letter from a qualified lawyer to prove that the consultation had been held.

I'm aware that this step won't stop anyone who is bound and determined to steal from his or her parents. As mentioned, that's a separate issue. But this step could be a huge help to the average individual with no specialized legal skills who is appointed. And let's face it, that's who most Attorneys are.

The named Attorney would sit down with the lawyer for an hour to find out what he can do, what he should do, and most importantly, what he should not do. He can find out about how and when to file taxes, what investments are allowed under legislation, who he may support with the parent's money, whether he can be paid for his services, and with whom he should share information. He will have established a contact so that if he runs into questions later on, he has someone to call. In my view, a parent who includes this requirement in a POA is doing a huge favour to the son or daughter named as Attorney.

The document can also state that the cost of seeing the lawyer for an hour is to be paid from the parent's money. This will ensure that someone who is appointed but doesn't have money to spare won't be prevented from stepping in as Attorney.

This is something I'd like to see more of in the future, and I predict that it's an idea that will take hold. I urge parents to think about it for their own documents.

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