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Wednesday, March 20, 2013

Power of attorney: It’s easily abused - Elizabeth O'Brien's Retire Well - MarketWatch

Power of attorney: It’s easily abused - Elizabeth O'Brien's Retire Well - MarketWatch: It’s a standard part of estate planning. It’s also, according to experts on elder fraud, a license to steal. It’s the power of attorney, a legal instrument designed to give a trusted individual the authority to handle financial or health matters for the person creating it.

As their own parents grow older—and, in many cases, lose the capacity to make their own financial and medical decisions—growing numbers of baby boomers are beginning to wrestle with the intricacies and pitfalls of the power of attorney. And of course, the day may not be too far off when they themselves may have to trust someone else with those powers. “They have great value and opportunity to misuse,” said Randy Thomas, a former police officer in Columbia, South Carolina who lectures nationally on elder financial abuse.

Estate plans usually involve what’s known as a “durable” power of attorney. These allow the trusted individual—legally, the “agent”—to retain power of attorney even when the person who created the document—the “principal”—has become incapacitated. A general power of attorney expires when the principal has lost capacity; these are usually limited to a certain transaction, such as a real estate closing or the license-plate example above. All powers of attorney expire when the principal dies