LTC Bullet: JD Warns DPOAs Dangerous
Tuesday June 12, 2001
A "Durable Power of Attorney" (DPOA) is among the legal documents most strongly and frequently recommended by elder law attorneys. A DPOA empowers the holder to act as a principal's agent after the principal becomes incapacitated. For example, living wills and physician health care directives are limited durable powers of attorney. Properly used, a DPOA can be far less complicated and expensive than a formal guardianship. Therefore, the DPOA is potentially a valuable estate-planning tool.
Unfortunately, durable powers of attorney have a dark side too. Sometimes, they are used by unscrupulous persons to expropriate a vulnerable elder's savings. Abuse of a DPOA may be simple theft, an unmitigated rip-off. Or, the DPOA may be used to impoverish a frail or chronically ill senior for his or her "own good" in order to get Medicaid nursing home benefits without spending down. Either way, the result is identical. A senior who could have obtained quality long-term care at the most appropriate level of care is suddenly made destitute and dependent on welfare-financed nursing home care. Someone else gets the money while taxpayers and nursing home owners get the bill.
An article titled "Durable Power of Attorney Reform and Streamlining Investigations of Vulnerable Adult Financial Exploitation Crimes: An Outsider Looking In" appears in the May/June 2001 issue of "Victimization of the Elderly and Disabled," a bi-monthly newsletter published by the Civic Research Institute, Inc. The author, John E. Lamp, JD, is a former United States Attorney, who invites comments at firstname.lastname@example.org. Here's an extended excerpt from his article:
"Financial durable powers of attorney continue to be the favorite vehicle for large-scale criminal financial exploitation perpetuated upon vulnerable adults. This fraud is arguably the fastest growing area of white-collar criminality nationwide. In 1999, there was a 26% increase in the number of overall complaints to the Washington State APS [Adult Protective Services] over the previous year. There is every reason to believe that these numbers will continue to grow at a very fast rate and only small numbers are being properly investigated and prosecuted.
"Durable powers of attorney cases often involve large amounts of money. The smallest amount of money at issue in a case I have worked on was approximately $35,000. In one instance, fraud was prevented from being perpetrated against a demented 80-year old World War II Bataan death march survivor and former Japanese POW slave laborer. His estate was worth nearly $600,000. In another case, through quick action by a bank, a private attorney and I, were able to save $1.5 million from being stolen by the 'friend' of a 94-year old vulnerable adult. Using a durable power of attorney, the perpetrator had been shifting liquid assets to joint bank accounts with survivorship provisions.
"The simplicity and ease of durable powers of attorney, whether they originate from an attorney's office or a stationery store, make the instruments very easy to use for criminal purposes. As often as not, unscrupulous attorneys (i.e., [DPOA] agents) can wipe out a vulnerable person's lifetime savings in a matter of days. THE PUBLIC POLICY IMPLICATIONS OF LARGE THEFTS FROM VULNERABLE ADULTS ARE SIGNIFICANT BECAUSE THE ASSETS CAN AND SHOULD BE USED FOR THE LONG TERM CARE OF VICTIMS, AND TAXPAYERS USUALLY PICK UP THESE COSTS WHEN THE ESTATES ARE STOLEN. [Emphasis added.] Prosecution after the fact seldom assists in the recovery of the assets. Accordingly, prevention through effective statutes, APS vigilance, and quick, efficient investigations are the most effective means of dealing with durable power of attorney abuse.
"The durable power of attorney instrument is in desperate need of a serious legislative overhaul making it a more formal document. Billions of dollars nationwide are stolen annually with the device. So far, few states have approached the problems associated with durable power fraud on a comprehensive basis." (p. 5)
Under these circumstances, it seems hard to imagine that any well-intentioned, properly motivated professional could oppose thoughtful DPOA reform. Unfortunately, that is not the case. Toward the end of his article, Lamp states:
"Durable power of attorney reform must occur if we are to better protect seniors against financial fraud. Expect resistance, as I have from ELDER LAW ATTORNEYS and other interested parties." (p. 13) Emphasis added.
CLTCF Comment: The National Academy of Elder Law Attorneys (NAELA) is the trade association for Medicaid estate planning lawyers. We call on NAELA to explain its position on durable powers of attorney. NAELA: If you are opposed to reform, why? How do you justify using DPOAs or guardianships for the purpose of impoverishing seniors to qualify them for public welfare? When will we hear a reasoned defense of this practice from its professional practitioners? In the meantime, all aging people are well-advised to make sure theyve planned ahead for the risk of long-term care expenses before they sign over their life savings prospectively to anyone through a durable power of attorney.