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Penalties for abusing your financial power of attorney

abusing your power of attorney

“With great power comes great responsibility.” This is true whether you are a superhero fighting crime, or if you were chosen by a family member to act as their power of attorney.

Unfortunately, power of attorney abuse cases run rampant. There are many legal penalties you may face if you abuse the trust your loved one has given you.

What is a power of attorney?

A durable power of attorney for finances is a document that allows another person to make decisions about your financial accounts if you are incapacitated. This document authorizes the agent who is typically a sibling, spouse, or child to act on behalf of the principal.

Agents with a financial power of attorney have a fiduciary duty to make decisions with your best interest in mind.  They have legal authority to access your financial information, including bank accounts, to pay your bills and make decisions about your finances and any real estate you own.

You can also put together a health care power of attorney, which gives authority to an agent to have authority to make medical decisions for you, including your end of life care. It can give consent for procedures and surgeries, and can make the decision to cease end of life care, if so authorized. Arizona state law also recognizes a durable power of attorney for mental health care. This document allows the agent to place you in a psychiatric facility.

How can a financial power of attorney be abused?

As you can imagine, with such power there is potential for elder abuse and financial abuse. Sometimes, our agents may not be aware of their responsibilities, and other times they may deliberately abuse their fiduciary duty under the document.

For example, Karen may appoint her son, Steven, as her agent to make all financial decisions under a power of attorney. Steven uses Karen’s bank account to pay her bills and mortgage. He may also pay contractors from her account to fix water damage to her home or to take care of her lawn. All of these actions are within the scope of his agency.

However, Steven may decide to treat Karen’s bank account as if it is his own bank account. Steven begins using his mother’s account to cover his credit card payments, to pay his bowling league dues, and to take an exotic vacation without his mother’s knowledge or authority. Steven may even decide to sell Karen’s house while she is still capable of living at home and use the proceeds to buy himself a luxury yacht. Instead of ensuring that Karen has enough money to cover her daily living expenses and weekly grocery store needs, he may give her an extremely limited budget with which she can only buy bread for peanut butter sandwiches to eat every meal. These actions are well beyond the scope of his authority.

What penalties can someone face for abusing their power of attorney authority?

If an agent abuses the authority granted by a power of attorney, they may face both civil and criminal consequences.

As for civil consequences, an agent can be sued for fraudulent conversion of the principal’s money and be forced to provide restitution to the principal. This means paying the principal back money with interest.

Criminally, an agent can be prosecuted for fraud, embezzlement, exploitation, and theft at a state or federal level. Arizona classifies certain types of elder abuse as a crime, meaning that you could face a Class 2 felony and five years of imprisonment if you are found guilty. Additionally, a power of attorney for finances in Arizona includes language that says if an agent misappropriates money, penalties can include damages up to three (3) times the actual loss or disinheritance.

What are the legal actions I can take if someone abuses the power of attorney I gave them?

There are a number of legal remedies you can pursue in the face of power of attorney abuse in addition to pursuit of a civil claim for conversion of property. If you are legally competent, you can revoke the power of attorney and issue it in favor of a new agent. You can also go to court and demand records of how your money was spent and ask the court to rescind unauthorized transactions.

If you are not legally competent to revoke the power of attorney that was previously granted to the abusive agent, a loved one can go to court to ask for legal conservatorship of the principal or ask to oversee the current agent’s actions moving forward.

It is imperative to think carefully before signing a power of attorney in favor of someone else. You want to ensure they are a trustworthy person who can make big decisions for you and is qualified to do so. If you choose not to select your adult child as your agent because they have a history of making questionable financial decisions, it does not mean you do not love your child. It means you are making a practical decision with your best interests in mind.

Working with a law firm that is experienced in estate planning and power of attorney documents can help you direct the scope of authority you assign to your agents to ensure that your needs are being met.

If you believe that someone is being subject to financial abuse or elder abuse, you can make an online report to the Arizona Department of Adult Protective Services.

This article is for informational purposes only and does not contain legal advice. To discuss your estate planning and power of attorney plan, contact Susan L. Sandys for a free initial consultation.

This blog is made available by the lawyer or law firm publisher for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By using this blog site you understand that there is no attorney client relationship between you and the blog publisher. The blog should not be used as a substitute for competent legal advice from a licensed professional attorney in your state.

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