A power of attorney can be an exceptionally useful tool when properly used. However, one of the difficulties with a power of attorney is the tremendous harm that can be done when misuse occurs. The power that allows an agent to pay bills and “handle” the affairs of a principal who is unable to handle his own affairs because of injury or incompetence is the same power that can allow an agent to steal from his or her principal leaving the person destitute. While there are laws that protect against this type of behavior there is often no meaningful oversight to prevent it from happening. A few steps that can be taken to protect you are listed below.
1.) Naming more than one agent and requiring that at least two agree.
2.) Having the actual Power of Attorney held in escrow by another party until a stated event occurs.
3.) Limiting the scope of the Power of Attorney so that certain assets cannot be transferred by the agent.
4.) Appointing only people you can trust as agent or agents.
In July of this year, 2010, the Uniform Power of Attorney Act became effective in Virginia. (See Virginia Code §§26-74 – 116) This act sets out the duties of an agent who has accepted appointment under a power of attorney, and anyone who is acting as an agent under a power of attorney should read and understand this act. The duties are listed in §26-85 and include requirements that the agent “act in good faith” and “act loyally for the principal’s benefit.” The act also requires the agent to keep records and to provide information to certain interested persons. If the agent refuses to provide the information a petition can be brought to force the issue.
In an earlier post I wrote about the benefits of a power of attorney. There are many benefits including ease of use. As often is the case the benefit is also a weakness as this is what makes it so easy to misuse.