Power of Attorney Abuse
The term Power of Attorney is often misused. A Power of Attorney is a legal document through which a principal appoints a person to act on their behalf as their agent or attorney-in-fact. The person acting on behalf of a principal is not a Power of Attorney as many incorrectly suggest.
People use a Power of Attorney, (hereinafter, “POA”), when they need or want to authorize another person to make important decisions on their behalf. A POA enables a principal to grant the agent or attorney-in-fact the right to handle their medical, financial, and personal affairs. Not all POAs are the same. They can vary based on the duration, the powers the principal is assigning, or the durability of the document.
POA abuse occurs when the agent or attorney-in-fact is not acting in the best interest of the principal. Frequently, POA abuse cases are difficult to differentiate from financial elder abuse, wherein an agent takes advantage of another person at the principal’s most vulnerable time of life. POA abuse can include fraud, forgery, theft, misappropriation, misrepresentation, self-dealing, and breach of fiduciary duty. An example of POA abuse would be as follows: Principal appoints his daughter as agent to address financial affairs during a time when he is receiving Hospice care for a terminal illness. Daughter changes beneficiary designations on all of the father’s accounts and gives herself the father’s home, his bank account, and many other assets immediately before the father dies; thereby excluding her siblings from inheritance. While the POA that father executed provided the daughter general financial powers, it did not expressly provide the daughter the ability to give herself assets or change beneficiary designations causing the assets to become hers when her father died.
The most common form of POA abuse is the abovementioned abuse by an agent in taking the principal’s assets as their own without having express powers to do so in a POA. In many cases, these abuses can be resolved through negotiated settlement or mediation after the harmful event; however, many of the events go unnoticed when the principal has few family members or friends to catch the abuse. Our law firm is currently involved in such a case where two agents obtained ownership of all assets owned by two deceased women who were never married and never bore children and much of the abusive conduct occurred within the last ten days of the decedent’s respective lives. Of course, the agents allege the decedents each orally instructed them to take their assets as their own.
The duties of an attorney-in-fact under a Durable POA in Missouri are governed by the Durable Power of Attorney Act, §§ 404.700–.735, RSMo. Section 404.714.1 of that Act provides, inter alia: “An attorney in fact who elects to act under a power of attorney is under a duty to act in the interest of the principal and to avoid conflicts of interest…. A person who is appointed an attorney in fact … has a fiduciary obligation … to avoid self-dealing and conflicts of interest.” Missouri’s Durable Power of Attorney Act codifies the concept that the relationship of principal and agent created by a power of attorney is by its nature one of trust and confidence, creating a fiduciary relationship and an obligation on behalf of the agent to act in the sole interest and for the sole benefit of the principal. Randall v. Randall, 497 S.W.3d 855 (Mo. App. 2016). As with all DPOA’s in Missouri, the decedent’s DPOA creates in an agent a “fiduciary duty” and an obligation to act solely for the principal’s benefit. Mintner v. Mintner, 530 S.W.3d 534 (Mo. App. 2017).
An agent’s argument that he or she acted in reliance to the principal’s oral instructions by gifting the agent the principal’s assets is not a valid premise. Missouri courts consistently hold that an attorney-in-fact may make gifts to himself or herself only if such gifts are expressly allowed in the DPOA. Section 404.710.6 RSMo. provides that certain powers of the agent as the principal’s attorney-in-fact must be “expressly enumerated and authorized in the power of attorney.” That statute provides, in pertinent part: Any power of attorney … shall be construed to grant power or authority to an attorney in fact to carry out any of the actions described in this subsection if the actions are expressly enumerated and authorized in the power of attorney. Any power of attorney may grant power [or] authority to an attorney in fact to carry out any of the following actions if the actions are expressly authorized in the power of attorney: (3) To make or revoke a gift of the principal’s property in trust or otherwise.
Missouri courts have consistently held that an attorney-in-fact is prohibited from making a gift of the principal’s property to himself, unless the DPOA contains express written authorization allowing him to do so. See Randall, 497 S.W.3d at 854-55 ; In re Estate of Lambur, 397 S.W.3d 54, 64 (Mo. App. 2013) ; and Herbert v. Herbert, 152 S.W.3d 340, 353 (Mo. App. 2004). “Whether the attorney-in-fact has oral authorization from a principal to make a gift to himself … is irrelevant.” Lambur, 397 S.W.3d at 64 ; Herbert, 152 S.W.3d at 353 (held that § 404.710.6 overruled prior opinions holding that a principal’s oral authorization is sufficient for the attorney-in-fact to make gifts to himself).
The prohibition against an agent’s actions encompasses more than “gifts” in the traditional sense. Agents are also prohibited from taking any action that would result in a principal’s assets eventually becoming the agent’s unless the language of the DPOA expressly allows it. See Herbert, 152 S.W.3d at 353-54 (adopting a black letter rule that an attorney-in-fact may not transfer the principal’s assets to a joint account which will become the sole property of the attorney-in-fact unless there is written authorization in the DPOA for the attorney-in-fact to make gifts to himself); see also Lambur, 397 S.W.3d at 64-65 (held that a fiduciary under a DPOA may not create a “gift” to himself by depositing the principal’s money into a bank account that is jointly owned with the attorney-in-fact, who has a right of survivorship).
POA abuse of an elderly person may constitute a variety of white-collar crimes or violate deceptive trade practices laws under Missouri or federal laws. While such blatant exploitation by an agent is alarming, most financial exploitation of the elderly happens at the hands of family members who have easy access to their trusting relative’s money and assets. Often, unscrupulous family members feel entitled to their elderly relative’s assets even though the principal may still need those assets for their own care.
If you are an abused senior or merely concerned about an elderly person being exploited financially, there are some short- and long-term remedies. You may report such events to law enforcement or call the Missouri Adult Abuse and Neglect Hotline. In the alternative, a concerned family member, friend, neighbor, or other person suspecting POA abuse should speak with an experienced elder law attorney to discuss the options and potential legal remedies, including a possible lawsuit.
Todd Miller regularly writes and speaks on various legal topic including estate planning, probate and elder law. He formed the Law Office of Todd Miller, LLC, 1305 Southwest Blvd., Ste. A, Jefferson City, Missouri in 2005. He has been recognized as 2016 Adviser of the Year by GolfInc; Golf Tax Consultant of the Year by Boardroom Magazine three times; and “10 Best” attorneys by the American Institute of Family Law Attorneys and “10 Best” attorneys by the American Institute of Criminal Law Attorneys. Mr. Miller earned his juris doctorate degree from the University of Missouri School of Law in 1999 and graduated with honors from Lincoln University in 1991. You may find him at www.toddmillerlaw.com (573) 634-2838 or on Facebook, LinkedIn, and Twitter.