A Power of Attorney (POA) is a legal document which grants someone to act in another's behalf. The person who signs the POA, the person granting that authority to another person, is called the "Principal". The person who is granted the authority is called the "Attorney-in-Fact" or, in Florida, the "Agent". Despite the term, Attorney-in-Fact, the Agent does not need to be an attorney. Most commonly a Principal grants the authority to act in his behalf to a trusted friend or family member. The Principal must sign the POA while of sound mind and competent. The reason people sign over the authority to act is that the person anticipates he will not be able to act for himself in the future.
A POA can be limited to the Agent doing one type of act, or even one single act in behalf of the Principal. This is called a Limited Power of Attorney and may be set up to automatically dissolve once the Agent has done his duty. For example, a person may execute a Limited Power of Attorney so that his Agent can sign documents for him while he is out of the country, or otherwise unavailable.
Another type of POA, called a "Durable Power of Attorney" is more powerful and long lasting. The reason people sign over the authority to act in their behalf is the same as for the Limited Power of Attorney, that the Principal anticipates not being able to act for himself. But a Durable Power of Attorney is usually meant to stay in place even after the Principal becomes incompetent or incapacitated. Elderly people frequently sign a Durable Power of Attorney which names an adult son or daughter as Agent, anticipating that at some point they will not be able to take care of their own personal business, due to dementia, or failing health, or both. Similarly, a mentally ill person, while lucid, may sign a Durable Power of Attorney naming a family member or trusted friend to act in his behalf, anticipating that he may at some point fall back into mental illness.
Florida has a standard form that is widely accepted and commonly used. In 2011, Florida updated the rules surrounding Powers of Attorney to conform with national standards. When a POA is used as intended, to protect the interests of the Principal, it is a Godsend for all involved. The aging parent who has fallen into dementia and cannot take care of her finances is protected by the Agent, (often an adult son or daughter), from making a mistake that could render the aging parent destitute. The adult son or daughter can sleep easier knowing that Mom or Dad is being taken care of. Elderly people can easily be duped by scam artists and conned out of their money, or become confused about their finances and not pay any bills whatsoever.
And, similarly, having a Durable POA in place for a mentally ill family member can save that person from wreaking havoc on his finances. For example, some people with Manic Depressive Disorder go on wild spending sprees during a manic phase. Left to their own devices, they will spend so irresponsibly as to leave themselves without any money to pay for necessities ... like rent, the mortgage payment, food, etc. A POA can literally save this person from himself, by delegating control of his finances to someone else.
First and foremost, an agent is a fiduciary and must only act within the scope of the authority of the power of attorney. In exercising their authority, an agent has a duty to:
- Act in good faith
- Act loyally for the sole benefit of the principal
- Act so not to create a conflict of interest that impairs the agent’s ability to act impartially to the principal’s best interest
- Act with care, competence, and diligence originally exercised by agents in similar circumstances
- Keep all financial records including receipts, disbursements, and transactions made on behalf of the principal
- Create and maintain an accurate inventory each time the agent accesses the principal’s safe-deposit box
Preserve the principal's estate plan, if known by the agent which includes:
- preserving the value and nature of the principal's property
- minimization of taxes
- eligibility for a benefit, program, or assistance program
- considering the principal's personal history in making or joining in making gifts
- Not act contrary to the principal's reasonable expectations known by the agent
- Not act in a manner that is contrary to the principal’s best interest
But ... if the Agent for the POA is not an ethical person, the damage that can be done to the Principal is appalling. Because there is a signed document authorizing the Agent to act, its often difficult to stop or undo things that are decidedly not in the best interest of the Principal.
The Agent can use or take the Principal's income, property, and resources for their own benefit. A POA assigns to the Agent the right to sell or transfer real property. All too often, an unscrupulous Agent will sell the Principal's home, keep the proceeds, and put the elderly Principal into an Assisted Living Facility. All the while, claiming that its for the Principal's own good. Or, the Agent can simply transfer the Principal's home into his or her own name, and treat the Principal like a tenant.
Likewise, an unscrupulous Agent can sell the Principal's personal property, such as jewelry or art, and keep the proceeds for his or her own benefit. The ways to abuse the power and authority granted by a POA are only limited to the greed and creativity of an unscrupulous Agent. In many instances, other family members and friends, do not spot the POA abuse until the damage is done.
Family members and friends of the Principal can take some steps to ensure that the Principal is being treated fairly. Look out for the following:
- A sudden change in the Principal's living arrangements;
- Increased secretiveness on the part of Agent and/ or Principal;
- The Agent refusing to allow other family members or friends to visit or call the Principal;
- The Principal seeming to be increasingly furtive about finances;
- The Principal going without necessary items; and
- The Principal becoming increasingly depressed or despondent.
Who can sue when there is an abuse of the power of attorney?
A person’s right to file a lawsuit is called “standing” in Florida.
The following persons may petition the court:
The principal or the agent, including any nominated successor agent.
- A guardian, conservator, trustee, or other fiduciary acting for the principal or the principal's estate.
- A person authorized to make health care decisions for the principal if the health care of the principal is affected by the actions of the agent.
- Any other interested person if the person demonstrates to the court's satisfaction that the person is interested in the welfare of the principal and has a good faith belief that the court's intervention is necessary.
- A governmental agency having regulatory authority to protect the welfare of the principal.
- A person asked to honor the power of attorney.
Entering into a Power of Attorney is a huge step and not to be taken without careful consideration. The Agent has all the duties listed above to follow, and even a financial mistake could cause a friend or family member to question his or her motives. For the Principal the stakes are even higher. A POA can be revoked in writing, but this must be done while the Principal is lucid and competent. For a Principal who is falling into dementia or mental illness, the fall will be much more serious, and the impact much harder, if they not only are losing their mental acuity, but losing their money and assets at the same time.