The Risks of Granting Broad Power of Attorney: How to Safeguard Against Abuse

Choosing someone to manage your affairs if you become unable to is a critical part of planning for your future. While a power of attorney (POA) is a powerful tool, granting one without careful consideration can lead to complications. An experienced estate planning attorney can help put proper safeguards in place, giving you confidence for your loved ones' future.

At Davidson Estate Law, we have spent over 25 years helping families with these important decisions. We believe in empowering our clients with clear information so they can protect their interests. Based in the San Francisco Bay Area, California, we can provide the support you need to understand the benefits of powers of attorney and the risks of granting broad power to protect against abuse.

What Is a Power of Attorney?

A power of attorney is a legal document that lets you (the "principal") appoint someone else (the "agent" or "attorney-in-fact") to make decisions on your behalf. This tool is a cornerstone of estate planning that allows your agent to manage your financial and personal affairs should you become incapacitated. 

There are different types of POAs. A general power of attorney gives your agent broad authority to act for you, while a special power of attorney limits their actions to specific situations. A durable power of attorney remains in effect even if you become mentally incompetent, which is why it is frequently used in estate planning. While this document is practical, it also places a great deal of trust and responsibility in your agent’s hands. 

The Dangers of a Broad Power of Attorney

When you grant someone a broad power of attorney, you are giving them significant control over your life. This can include managing bank accounts, selling property, and making healthcare decisions. While most agents act honorably, the potential for abuse is real. An agent with unchecked power might misuse their position, intentionally or unintentionally. 

Financial Exploitation 

Financial abuse is one of the most common risks associated with a broad POA. With the powers granted by a broad POA, your agent could potentially engage in any of the following actions.

• Transfer your money to their personal accounts. 

• Sell your property, such as your home or car, for their own benefit. 

• Make risky investments with your savings. 

• Use your credit cards or open new lines of credit in your name. 

• Change the beneficiaries on your retirement accounts or life insurance policies. 

This kind of exploitation can drain your life savings, leaving you and your family in a difficult financial position. The abuse often goes unnoticed until a great deal of damage has been done, particularly if you cannot monitor your own finances due to illness or incapacity. 

Personal and Healthcare Decisions 

A POA can also grant an agent authority over personal and healthcare choices. An agent who does not fully understand or respect your wishes may make decisions that conflict with your values. This might involve consenting to medical treatments you would have refused or making living arrangements that you would find unacceptable. When the agent’s authority is too broad, your personal autonomy is often at risk. 

How to Safeguard Against POA Abuse

Taking proactive steps when drafting a power of attorney is the best way to protect yourself. By establishing clear limits and oversight, you can minimize the risk of someone abusing the authority you grant them. 

Choose Your Agent Wisely 

Selecting the right person to act as your agent is one of the most important decisions you will make in this process. Choose someone you trust completely, such as a person with a strong moral compass and good judgment. It is not always best to choose a person based on birth order or relationship alone. Consider their financial responsibility, their ability to handle pressure, and their willingness to act in accordance with your wishes. It is also wise to name an alternate agent in case your first choice is unable or unwilling to serve. 

Limit the Agent’s Authority 

Instead of granting a broad, general power of attorney, you can tailor the document to your specific needs. This is known as a special or limited power of attorney. You can define exactly which powers your agent has and which they do not. For example, you can authorize your agent to pay your monthly bills but prohibit them from selling your real estate or changing your beneficiaries. You can also require your agent to get a second opinion from another trusted individual for transactions over a certain dollar amount. 

Implement Checks and Balances 

Building accountability into your POA document can discourage misconduct. One effective strategy is to require the agent to provide regular accountings to a third party, such as another family member, a friend, or your attorney. This transparency makes it much harder for an agent to hide improper transactions. Knowing that someone else is reviewing their actions often maintains honesty and a focus on their responsibilities. 

Keep Your Plan Updated 

Life circumstances change, and so should your estate plan. Review your power of attorney and other estate planning documents every few years or after any significant life event, such as a marriage, divorce, or the death of a named agent. Regular reviews provide an opportunity to confirm that your chosen agent remains the right person for the job and that the powers granted are still appropriate. 

Power of Attorney Laws in California

In California, the laws governing powers of attorney are outlined in the state's Probate Code. These statutes are designed to provide a framework for creating and using POAs while also offering protection against abuse. A key aspect of California law is the requirement that an agent must act in the principal's best interest. This is known as a fiduciary duty. Under the California Probate Code, an agent has a duty to: 

• Act solely in the interest of the principal and avoid conflicts of interest. 

• Keep the principal's property separate from their own. 

• Maintain accurate records of all transactions made on behalf of the principal. 

• Follow any specific instructions given in the POA document. 

California law also allows the principal to sue an agent who breaches their fiduciary duty. If a court finds that an agent has acted improperly, it can order the agent to return any misappropriated assets and to compensate for any resulting damages. Additionally, the court can revoke the POA and hold the agent liable for attorney's fees and other costs. These legal protections are important, but preventing abuse from the start is always the better approach. 

Estate Planning Attorneys in Oakland, California

Creating an estate plan for your family's financial future and care is one of the most meaningful things you can do. At Davidson Estate Law, our experienced estate planning attorney has served as a trustworthy source of legal guidance and compassionate support to families in the San Francisco Bay Area.  

We understand the challenges these matters present, and we are here to help. Whether you need to draft a will, set up a revocable living trust, administer a loved one's assets, or deal with probate court, we invite you to connect with us. Based in the San Francisco Bay Area, we serve families across Oakland, Walnut Creek, Berkeley, San Francisco, El Cerrito, and Alameda. Contact us today to schedule a free consultation.