POA | blog.firstffcu.com

Along with the potential benefits associated with establishing a power of attorney, come potential risks to consider. Our first article in this series discussed what a power of attorney (POA) is – a legal document that ensures your wishes (typically having to do with your assets), are carried out in a manner that you as the principal approve of. It gives a trusted person (often referred to as an agent), the legal authority to handle these wishes. Anyone you trust – such as a family member or friend, can serve in this role for you.

Even when designating someone you trust as your POA, the risk of fraud and abuse can still exist. This person may perform actions that the POA document does not authorize, manipulate you or your assets for their own personal gain, or not act in your best interest.¹

There are several ways in which POA fraud and abuse can occur, so it is best to become familiar with some of them so you can recognize if it may be happening to you or someone you care about.

Financial Exploitation: In this instance, the agent may use the principal’s money for their own gain instead of the principal’s needs – often without informing the principal. They may withdraw funds from the principal’s accounts for their own use or conceal the reason for withdrawing the funds. They may justify an expenditure by saying it was for the principal’s benefit, but then use the funds for something that does not align with the principal’s needs or wishes.²

Unauthorized Gifting: This occurrence happens when the agent authorizes gifts to themselves or other family members without the authority to do so, without the principal’s knowledge, or without considering if it is in the principal’s best interest. Gifting is unauthorized if the POA does not explicitly authorize gifting, which can include recipients and the dollar amount(s) that may be gifted.³ If gifting is authorized – the agent should consider the principal’s entire financial situation, upcoming financial obligations, and if it is consistent with their personal character.³

Neglect of Duties: Neglect occurs when the agent does not provide care as required by the POA – such as meeting medical needs or providing adequate living conditions.² This can also take the form of neglecting financial responsibilities, such as not paying bills.

What are common red flags of POA fraud?

Bills are unpaid, even though there should be sufficient funds to pay them. This can suggest that the agent is using the funds for unauthorized purposes or neglecting to manage the principal’s financial obligations.
Sudden, unexplained changes to legal documents. Especially if the changes benefit the agent, or if the principal is unaware of or didn’t consent to the changes.²
Information is being withheld from the principal and principal’s loved ones. The agent may avoid answering questions or giving information about the principal’s financial situation, including their bank accounts or investments.⁴
The principal becomes isolated from loved ones. The agent may isolate the principal from those who care about them so that it is harder to detect if something is not right. Isolating the principal also allows the agent to exercise more control, without the potential for others to intervene.²

How can you protect yourself from POA fraud and abuse?

Choose your agent wisely. Choosing an agent that you trust, and whose values align with your own, to ensure they are capable of following your wishes and putting your needs first.²
Specify the scope of the POA. Clearly defining tasks, responsibilities, and decisions to be made on your behalf can minimize the potential for abuse.² This aligns the power that is legally granted with your intentions, and only gives the agent the authority needed to carry out your wishes.
Clearly communicate with your agent. Continually check in with your agent to confirm your wishes and preferences. Promptly make any changes you desire to the POA so that the agent remains aligned with your wishes.
Inform trusted individuals about your POA. By informing trusted individuals such as family, friends, and business partners about your POA – they can be on the lookout for any red flags that signal fraud or abuse.
If possible, remain involved in decision-making. Review the agent’s activity, such as any financial transactions they are conducting or any medical decisions they are making on your behalf. This encourages transparency between you and the agent and keeps you involved in your affairs, to the degree you wish to be.²

To report POA fraud, contact Adult Protective Services (APS) in your state or to the National Center on Elder Abuse (NCEA). Any identity theft incidents related to fraud should be reported to the principal’s financial institution, the local police, and to the Federal Trade Commission at identitytheft.gov.

If you are thinking about your financial future and retirement, as well as estate planning – the First Financial Investment & Retirement Center will be hosting an exclusive no-cost virtual seminar on the Transitions to Retirement with a Focus on Estate Planning, on Wednesday, October 8^th at 6pm.

(697533-1 and 622155)

You can also register for this session by contacting Maureen McGreevy, LPL Financial Advisor at 732.312.1534 or emailing maureen.mcgreevy@lplfinancial.com

Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and First Financial Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using First Financial Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or First Financial Investment & Retirement Center.

Securities and insurance offered through LPL or its affiliates are:

This material is for general information only and is not intended to provide specific advice or recommendations for any individual. For individual estate planning advice, consult with an estate attorney.

John Lewandowski of Heban Murphree Lewandowski Law, March 12, 2022
1. What Is Considered Power of Attorney Abuse? | HML Law
Edward Gates for American Judicial System, October 10, 2023
1. How Do You Prove Power Of Attorney Abuse: Steps and Strategies for Justice
National Research Legal Group, Inc., June 19, 2019
1. ESTATES: Gifts Under a Power of Attorney
Mark R. Manceri, P.A., June 9, 2023
1. 6 Warning Signs That Power Of Attorney May Be Abused

The topic of estate planning can be difficult to think about, but it is an important one. An estate plan will designate how you’d like your assets distributed, provide your healthcare directives, and will protect your loved ones by minimizing conflict and ensuring their financial security. In this article, we will be discussing the power of attorney (POA) component of estate planning and why it might be important to have one.

A power of attorney gives you a say now – in how you wish to handle your affairs in the future, should you become unable to do so.¹ A POA is a legal document that ensures your wishes (typically having to do with your assets), are carried out in a manner that you as the principal – approve of. It gives a trusted person (often referred to as an agent), the legal authority to handle these wishes. The person you designate as a power of attorney doesn’t actually have to be an attorney. Anyone you trust – such as a family member or friend, can serve in this role for you. You can even designate more than one person, assigning different responsibilities to each. ²

The power of attorney can go into effect upon your incapacitation or any other triggering event you specify. Individual states have various power of attorney laws, so it’s important to become familiar with your state’s specific regulations to make an informed decision. ²

There are also several different POA designations, so it’s best to become familiar with what is involved with each one – as well as when a certain designation may be needed.

General Power of Attorney: An agent under this agreement can serve any needs, as your state allows. They can do things like sign checks, sell property, pay bills or make bank deposits and withdrawals. A key limitation of a general POA is that it is no longer effective if the principal becomes incapacitated. Due to this, a general POA might be most effective for short-term needs or specific tasks.

Durable Power of Attorney: A durable POA will remain in effect even if the principal becomes incapacitated, allowing the agent to continue to make decisions when the principal is unable to do so. A durable POA remains in effect from the day it is executed and through the principal’s incapacity. This type of POA can ensure a seamless transition in decision making should the principal become incapacitated.

Limited Power of Attorney: An agent under this agreement can serve specific legal needs for limited timeframes.

Healthcare Power of Attorney (HCPA): Also known as a medical power of attorney, this document appoints someone to make medical decisions for you if you are incapacitated and ensures that your healthcare preferences are respected – even when you cannot communicate them. A HCPA is typically a spouse or family member who you trust, and who would likely recommend a course of action you would agree with. A backup agent should also be identified, in case your initial choice is unavailable or unable to act at the time needed.

What are the benefits of a POA and why have one?

Protect your interests now: Since a POA can only be executed when you are of sound mind, you can tailor your POA to your specific requirements and designate matters to continue to be handled as you currently wish in the present.
Ensure someone you trust will handle your affairs: Establishing a POA allows you to select a trusted person as your agent, giving you confidence in how your affairs will be handled. The agent will be making critical decisions and advocating on your behalf, therefore you’ll want to choose someone who shares your values and who will act as you would have.
Ease the burden should the unexpected happen: A POA provides clear direction on how decisions should be made and who is responsible for making them, thereby reducing conflicts and feelings of uncertainty among family members. It also provides reassurance that the principal selected an agent who is capable of honoring their wishes and acting in accordance with their values.

Creating a power of attorney is an important aspect of estate planning that will protect your wishes and the assets you’ve worked hard to grow over the years. No matter what your age or your stage in life, getting your affairs in order and your records organized is an essential part of financial planning. Estate planning can be complex, and the specific documents needed may vary based on your individual circumstances. It’s wise to consult with an attorney who specializes in estate planning to create a plan that aligns with your goals and complies with local laws. You’ll also want to make sure your financial planner knows the details of your estate plan. By including these details in your financial plan, you can ensure your end-of-life wishes will work as you intended.

Should you be thinking about your financial future and retirement, as well as estate planning – the First Financial Investment & Retirement Center will be hosting an exclusive no-cost virtual seminar on the Transitions to Retirement featuring a bonus segment on Estate Planning, on Wednesday, October 8^th at 6pm.

(697533-1 and 622155)

You can also register for this session by contacting Maureen McGreevy, LPL Financial Advisor at 732.312.1534 or emailing maureen.mcgreevy@lpl.com