Power of Attorney Abuse - Buyer Beware
Below is a MRR and PLR article in category Reference Education -> subcategory Legal.
Power of Attorney Abuse: A Warning for All
Summary
Powers of attorney are essential yet often misused estate planning tools. Understanding how they can be abused and learning preventive measures is crucial.
Understanding Power of Attorney
A power of attorney (POA) allows a person, known as the principal, to grant legal authority to another person, the agent, or attorney-in-fact, to make decisions on their behalf. This can include managing bank accounts, real estate, and other assets.
Risks and Abuses
Unfortunately, POAs are vulnerable to abuse. Common issues include self-dealing, embezzlement, and unauthorized gifts. An agent may misuse their power by draining the estate, altering beneficiary designations, or opening joint accounts to benefit themselves.
Legal Remedies
Challenging a POA creation due to lack of capacity or improper procedures is possible. If an agent misuses a valid POA, legal action can be taken to recover stolen assets or seek compensation. Principals can sue directly if alive, while estates or beneficiaries can pursue action if the principal has passed, often under claims of breach of fiduciary duty or estate planning interference.
Preventive Measures
Given the risk of abuse, it's wise to restrict POA use. Many principals safeguard the document with their attorney, only activating it upon specific conditions like incapacity.
By understanding these risks and taking precautions, you can better protect against potential power of attorney misuse.
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