A power of attorney can be an extremely useful and flexible tool for people who want to delegate authority to others to act on their behalf. Many times however, people do not fully understand the significance of a power of attorney and its full range of consequences. As statistics show us, with most cases of elder abuse going unreported, the power of attorney can easily lead to this abuse of loved ones.
A power of attorney is a document that creates an agency relationship between the person granting the power (principal) and the person receiving the power (agent). The agency relationship gives the agent the power to act on behalf of the principal in either a general or limited capacity. A general power of appointment may give an agent financial and medical powers and will often contain a catch-all phrase giving the agent the authority to perform all things the principal could do for himself. A limited power of attorney, on the other hand, only gives the agent the power to act on behalf of the principal in specific situations.
While, a power of attorney is perhaps the single most useful tool “to deal with the possibility of future incapacity because of its flexibility, reasonable cost, and ease of use,” a power of attorney can also be abused.
Questions and concerns of abuse often arise when an agent changes the beneficiaries of life insurance or employment benefits pursuant to a power of attorney. In the absence of fraud, the general rule in Pennsylvania is that an agent acting under a general power of attorney has the right to make these types of changes to beneficiary designations.
With the ease of financial abuse through a power of attorney, the temptation can be great, even for loved ones. Thus, we should remember to take great care in selecting an appropriate agent.
If you would like to learn more about powers of attorney and other estate planning devices, please contact Adam Anderson at 412-209-3200 for a free consultation.