Power of Attorney with Protector
Many senior citizens appoint a trusted family member or friend as an agent under a financial power of attorney (POA). This often occurs when the senior has an illness or disability or is elderly and less able to remember to pay bills on time or to drive to the bank when needed.
The appointed agent has a duty to act in the best interest of the principal who appointed him/her. Problems may arise when the agent is dishonest and puts his/her interest above the best interest of the principal. A dishonest agent may steal money or property from the principal.
Another problem may be that the agent is trustworthy, but is not skilled or competent in money management, or does not have enough time to do the job properly.
The principal should not choose an agent who has financial problems, spending problems, or has issues with gambling or substance abuse, or has previously committed abuse or mistreatment of the principal.
Problems may arise when no one is monitoring the agent to verify that the agent is performing the required duties in a timely and proper manner.
Designating a Protector
To add protection for the principal, the principal may designate a protector in the power of attorney to monitor the performance of the agent, or pre-approve checks and spending. The protector should have money management and record keeping skills, such as a daily money manager, bookkeeper or accountant, or another family member with those skills.
The protector named in the power of attorney could have the power to replace the agent if he/she is not performing the required duties under the terms of the financial power of attorney. The protector could have the authority to train the agent on proper record keeping and daily money management.
A protector would be authorized to receive copies of all financial information, including brokerage, bank account, tax and credit card statements, insurance, benefits and medical bills, and have the right to inquire about financial accounts and bills regarding the actions of an agent. The protector would not have the power to appoint themselves as agent.
The principal can designate a first and second alternate agent, as a backup, in the event the primary agent is not willing or able to serve, or is replaced by the protector due to misfeasance (errors and omissions) or malfeasance (dishonest acts). The principal could also choose to appoint co-agents, so that two signatures are required for checks and financial transactions.
Trust with Protector
Some trusts are set up to have a trustee and a protector. The protector makes sure that the trustee is acting according to the terms of the trust, and in the best interest of the beneficiaries. A power of attorney can be written to include a protector, in a similar manner to a trust with a protector.
A protector can help to protect a senior citizen and prevent financial abuse by the agent.
Contact an estate planning attorney or elder law attorney for legal advice on how to add a protector to a financial power of attorney.
[Disclaimer: This article is not to be used or considered as legal advice.]