The General Durable Power of Attorney (“GDPOA”) has often been described as the most effective burglary tool since the crowbar. The defensive use of the elder principal’s GDPOA can minimize the potential for Elder Financial Abuse. Proper counseling of an elder by the estate planning attorney, and customized drafting of the GDPOA to address the elder’s specific worries about the powers granted to the agent, can help minimize the potential for EFA.
Of particular concern to many elders is the abuse of gifting authority under the GDPOA, or other granted powers that could defeat her estate plan if used improperly by an unscrupulous agent. Other problematic powers that are routinely granted under many boilerplate GDPOAs include the authority to make tax-motivated transfers, to exercise disclaimers or powers of appointment, to sell assets subject to a specific bequest in the elder’s Will, to change beneficiary designations for the elder’s non-probate assets (for example, life insurance, retirement plans, accounts with transfer-on-death or pay-on-death designations), to create joint interests with the right of survivorship, and to create, amend, revoke, or terminate an inter vivos trust that would avoid the probate process.
The law in many states requires a person to opt-in to each and every power granted under a GDPOA, especially the powers noted above. Although the expense of customized drafting, explanations of opt-in powers and review of worst case scenarios for the illicit use of granted powers can be significant, these approaches can provide enhanced protection against EFA for the elder and the intended beneficiaries of her estate plan.
Additional protection against EFA can be afforded by setting forth in the GDPOA specific duties of the agent (signed and acknowledged by the agent), including the duties of loyalty, good faith, and due care; a duty to keep the principal’s property separate from that of the agent; the duty to denote clearly any of the principal’s property titled in the name of the agent in that capacity; and the duty to keep a contemporaneous record of each transaction undertaken by the agent on behalf of the elder, a running account of all receipts and disbursements as agent, and a full annual (or more frequent) accounting to the principal, her conservator, if any, other persons designated in the GDPOA to receive this information, and to the elder’s executor or other personal representative within 90 days of her death.
The GDPOA should also address self-dealing and conflicts of interest that inure to the benefit of the agent, including any specific examples the elder wishes to identify (for example, investments in the agent’s personal business or improvements to the agent’s residence or other properties). The GDPOA should also outline whether and how the agent is to be compensated for services while acting as agent (for example, hourly at a specified rate, or a fee based on the value of the assets under management). Fairly compensating an agent can encourage him to be more honest, attentive and diligent in the exercise of his duties, and help forestall EFA.
If you are interested in learning more about what it means to be a Lawyer With Purpose. Come join us in Phoenix for 2.5 days of technical legal information at the 2014 Asset Protection, Medicaid & VA Practice With Purpose Program October 20-22nd. Click the link to register today!
Kristen M. Lewis, Esq., Member of the Special Needs Alliance and Fellow of the American College of Trust and Estate Counsel.
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