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By Liza Horvath


Power of Attorney – A License to Steal


As with many inter-family thefts, the intention of Carol’s daughter was not to steal – but simply to borrow money from her mom’s accounts and then pay it back – before anyone noticed. Melody was embarrassed that, yet again, she had failed to budget her own money properly and needed a short-term loan from her mom.


Using the power of attorney that her mom had given her in case of emergency, Melody withdrew money from Carol’s bank and planned to replace the funds when she got her next paycheck. Unfortunately, the ease with which Melody was able draw on her mother’s substantial savings was seductive and, when the looting was noticed years later, Melody’s siblings sought felony elder abuse charges against their sister.  


Estate attorneys routinely prepare Power of Attorney documents for clients. A will, trust, health care directive and financial power of attorney form a package that provides representatives with the legal “teeth” they will need to help us manage through life’s events. The power of attorney document, however, causes anxiety for many estate planning attorneys.  


Lynn Lozier, an attorney with Heisinger, Buck and Morris, says, “A power of attorney document that is effective upon signing is a powerful document and necessitates careful consideration in the choice of agent – the person named as your representative. It is important that we appoint only those persons we trust most to be our executor, trustee or agent under a power of attorney.” Some attorneys go so far as to say that such a power of attorney document gives your agent “the license to steal.” Lozier adds that while clients appoint representatives they trust, circumstances can change. In Carol and Melody’s case, Melody lost a high-paying job and, while her new job helped, she was short every month.     

So why have a power of attorney that is immediately effective when presumably your representative will only need it in an emergency or if you are otherwise unable to act on your own behalf? As with many legal issues, the answer is not clear. Two types of power of attorney documents are normally used: a durable power that, once signed, provides your agent immediate power and a springing power that only becomes effective in certain circumstances – like if you were deemed to lack capacity by two licensed physicians. The springing power sounds perfect, right? The problem is that it will take time to get two physicians’ written opinions and, in addition, strict privacy laws exist regarding the release of health related information that can also slow things down.


Some attorneys prepare the immediately effective document and keep it in their office. This way, they reason, an agent must come to the firm to obtain the document which gives the attorney an opportunity to determine if releasing the document will be in the best interest of the client. This appears to be a good solution but delays can occur if the attorney is unavailable. For example, a local attorney was holding original documents when he had to have major, emergency surgery. For the months while he was out recovering, clients had no access to their original documents.     


Attorneys are in agreement on one point: Neither form is perfect so be aware of the differences and decide which is best for your situation.

Liza Horvath has over 30 years experience in the estate planning and trust fields and is the president of Monterey Trust Management, a financial and trust management company. This is not intended to be legal or tax advice. If you have a questions call (831)646-5262 or email liza@montereytrust.com










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