ABUSE AND THE DURABLE POWER OF MARCH 1994...durable power of attorney in the 1%0s, were seeking to create a simple, inexpensive financial management tool. Over the last thuty years,

ABUSE AND THE DURABLE POWER OF ATTORNEY: OPTIONS FOR REFORM

MARCH 1994

Government Law Center Albany Law Sdml:.,..

80 New Scotland Avenue Albany, NY 12208

www.als.edu

O Copyright 2006 Albany Law School

GOVERNMENT LAW ONLINE publications are available at www,government1aw.org

ABUSE AND THE DURABLE POWER OF ATTORNEY: OPTIONS FOR REFORM

Jonathan Federman

and

Meg Reed

1993 Edgar and Margaret Sandman Fellows

MARCH 1994

0 Copyright 2006 Albany Law School

These materials are copyright by Albany Law School (ALS) on behalf of its Government Law Center or ALS licensors and may not be reproduced in whole or in part in or on any media or used for any purpose without the express, prior written permission of Albany Law School or the licensor. Neither Albany Law School, the Government Law Center or any licensor is engaged in providing legal advice by making these materials available and the materials should, therefore, not be taken as providing legal advice.

All readers or users of these materials are further advised that the statutes, regulations and case law discussed or referred to in these materials are subject to and can change at any time and that these materials may not, in any event, be applicable to a specific situation under consideration. The information provided in these materials is for informational purposes only and is not intended to be, nor should it be considered to be, a substitute for legal advice rendered by a competent licensed attorney or other qualified professional. If you have any questions regarding the application of any information provided in these materials to a particular situation, you should consult a qualified attorney or seek advice from the government entity or agency responsible for administering the law applicable to the particular situation in question.

ABUSE AND THE DURABLE POWER OF ATTORNEY:

Options for Refom

Jonathan Federman

and

Meg Reed

1993 Edgar A. Sandman Fellows.

March 1994

Copyright: March 1994

by the Government Law Center of AIbany Law School.

TABLE OF CONTENTS

EXECuTrVE SUMMARY

I. INTRODUCTION

PAGE

i

1

A. Abuse and the Durable Power of Attorney: 4 An Emerging Trend

B. Summary of the Arguments For and Against 6 Regulation of Durable Powers 01 Attorney

11. THE DURABLE POWER OF ATTORNEY 9

111. A HISTORY OF THE DURABLE POWER OF ATTORNEY 12

A. THE DURABLE POWER OF ATTORNEY PAST AND PRESENT 12

1. The Common Law to 1969 12 2 Promulgation of the UPC -- 1969 13 3. Adoption of the Uniform Durable 14

Power of Attorney Act - 1979 ,

4. 1984 to the Present 16

B. THE PREOCCUPATION WITH MAKING THE @URABLE 18 I POWER OF ATTORNEY EASIER TO USE ,

1. Durability 2. Statutory Short Forms 3. Protecting Third Persons 4. Springing Powers 5. The Problem

IV. REGULATING DURABLE POWERS OF ATTORNEY: IS lT TIME TO TAKE ACTION?

V. RESULTS OF GLC SURVEY

A. THE SURVEY SAMPLE: 28 DEMOGRAPHICS AND RESEARCH METHODOLOGY

B. INCIDENCE OF ABUSE 29

C. DO THE BENEFITS OF A DURABLE OF ATTORNEY OUTWEIGH THE RISK OF ABUSE?

D. SHOULD SOMETHING BE DONE?

E. PERSONAL KNOWLEDGE OF ABUSE

PAGE

33

VI. SETTING THE SCENE: THE NEED FOR LEGISLATIVE OPTIONS 43

I

VII. ANALYSIS OF LEGISLATIVE OPTIONS TO SAFEGUARD 47 AGAINST DURABLE POWER OF A ' T T o ~ Y ABUSE

1 State durable power of attorney statutes should be amended to include formal execution requirements

2. States should include simple cautionaq 5 1 language in all pre-printed power of attorney forms warning principals of the powers being conveyed

3. When using a statutory short form durable power of attorney, require that the principal affirmatively signify the powers s h e wishes to convey to the attorney-in- fact rather than to eliminate those powers not wanted

4. Recordation of all durable powers of attorney should be required to protect principals and enable third parties to ascertain the validity of a durable power of attorney

5. Durable power of attorney statutes should provide clearly specified procedures for revocation

6. Permit interested parties to petition a court to terminate the durable power of attorney if the agent is acting improperly

7. Attorneys-in-fact should be held to statutory fiduciary' standards similar to other statutory fiduciaries such as trustees and executors, and therefore as recognized statutory fiduciaries, agents should be entitled to a statutory commission if the durable power of attorney instrument fails to address compensation

8. Require notification to the principal (or a designated third party) whenever the durable power of attorney is used by the attorney-in- fact for a transaction over an amount specified by the principal in the document

'

9. States should consider revising criminal statutes to proscribe enhanced sentences for those who commit crimes such as durable power of attorney abuse against elderly and incapacitated individuals

10. Create a public registry listing individuals who have been convicted of durable power of attorney abuse

11 Require that attorneys-in-fact post a surety bond

12. Require that a third party be given, the power to revoke the durable power of attorney in the event the principal is unable to do so

13. Require principals to name more than one attorney-in-fact

14. Require the attorney-in-fact to provide an annual accounting to a court of law

15. Require mandatory reporting by certain third parties of known or suspected.'durable power of attorney abuse

PAGE

68

CONCLUSION

ENDNOTES

APPENDIX

PAGE

ErnCUTIVE SUMMARY

i

A durable power of attorney is a legal device which gives an agent the power to

perform financial transactions on behalf of another individual. A very popular estate

planning tool, the durable power of attorney has recently gained unfavorable attention

as accounts of abuse have found their way into the media, elder care agencies and

courtrooms.

A new study by the Government Law Center (GLC), discussed in detail below,

revealed that 82% of elder care attorneys and service providers believe that durable

power of attorney abuse is an issue that merits a legislative/administrative response.

Presently, there are few 1egaVadministrative protections for potential victims of durable

power of attorney abuse. The durable power of attorney abuse is, in its current form,

a largely unregulated and unmonitored device.

The lack of regulation and monitoring of the durable po er of attorney was , t

created by design. The drafters of the Uniform Probate Code, o first pioneered the a durable power of attorney in the 1%0s, were seeking to create a simple, inexpensive

financial management tool. Over the last thuty years, states have made reforms to

durable power of attorney statutes while keeping in mind its original purpose. An

historical inquiry into the development of durable powers of attorney reveals that past

reforms have taken a singular direction, focusing primarily upon improving the utility of

the device. While such a direction may have been appropriate in the past, it appears

that a more balanced approach may be required for the future.

The GLC study, based on responses from 410 elder law attorneys and social

service providers from 46 states and the District of Columbia, reveals that currently

there is, at least, a fair degree of durable power of attorney abuse. Ninety-four

percent of the respondents believed that durable power of attorney abuse occurs at

least occasionally. Two-thirds of these respondents had encountered durable power of

attorney abuse. Out of that group, 16% had encountered durable power of morney

abuse six to ten times and 22% encountered it ten or more times. The abuse was

often quite severe, at times depriving persons of a substantial portion of their life

savings. For example, in 48% of the 270 incidents of abuse reported in the study, 75%

or more of the principal's assets were exploited. Additionally, only 23 (8%) of these

270 cases were reported in the popular media, suggesting that durable power of

attorney abuse is more widespread than commonly believed.

In light of this data, it appears that protective reforms are needed. Refom

should start with regulations that would help curb abuse without imposing too great a

burden on all those who use durable powers of attorney. Policymakers working toward

reform should consider the following:

* Creating formal execution requirements

* Including cautionary language in statutory short forms warning principals of the authority being conveyed

* Requiring principals using a statutory short form to affirmatively signify the powers they wish to convey rather than eliminating those powers not wanted

* Requiring that all durable powers of attorney be recorded

* Establishing clear revocation procedures

* Permitting interested persons to petition a court for the purpose of terminating the durable power of attorney

* Holding attorneys-in-fact to statutory fiduciary duties and entitling them to a statutory commission

* Requiring notification to the principal whenever the durable power of attorney is used by the attorney-in-fact for a transaction over an amount

* specified by the principal

ah Revising criminal statutes to impose harsher penalties on those who abuse a durable power of attorney

* Creating a public registry listing individuals who been convicted of durable power of attorney abuse

In taking legislative/administrative action in this area an effort must be made to

steer clear of extremes. By so doing, government can best serve the dual goals of

allowing for simple, inexpensive third-party financial management and protecting those

who may be susceptible to abuse.

A. Abuse and the Durable Power of Attorney: An Emerging Trend

The durable power of attorney is a legal device which gives an agent the power

to perform financial transactions on behalf of another individual.' It has become a

popular estate planning tool, because it provides a simple, inexpensive alternative to

court proceedings normally required for third-p financial management.* The device, P in varying forms, is statutorily authorized in all fifty states and is widely used to

accommodate financial management for individuals who cannot, or simply do not wish

to, manage their own affairs.3

Recently, attention has been focused on the emergence of reported durable

power of attorney abuse.' Newspaper accounts, litigation, and stories related by

attorneys, social service providers, and family members indicate t b t an unknown

percentage of individuals entrusted with the control of another's sets by a durable II power of attorney are abusing their authority by converting assets to their own use.

The abuse can be severe, at times depriving the principal of both a lifetime of savings

and the ability to trust another.

The principal, or person who executes a durable power of attorney, usually

wishes to delegate to another the power to make Various financial transactions (e.g.,

banking, real estate) on hisher behalf. There are a number of reasons why someone

4

may choose to do this: for example, the individual may no longer be able to make

these transactions; may be anticipating, or planning for, future incapacity; or may be

taking this course merely for convenience. The agent, or attorney-in-fact, is often an

immediate family member or close friend who, as a result of his/her kinship or position

of trust, is given wide latitude with respect to the management of, and access to, the

principal's assets. I

Whether this relationship is actually being abused has largely been a subject for

speculation. Many suggest that the documented incidences of durable power of

attorney abuse are mere aberrations, while others suggest the scant documentation

represents only the "tip of the iceberg."

In an attempt to determine whether such abuse actually exists, the Government

Law Center at Albany Law School conducted a nation-wide survey to ascertain the

nature and extent of durable power of attorney abuse. The findings, at a minimum,

suggest that there is some degree of abuse.

B. Summary of the Arguments For and Against Regulation of Durable Powers of Attorney

Advocates for regulation of durable powers of attorney argue that the need for i

such measures derives from the fact that there are presently few legal or administrative

protections for potential victims of durable power of attorney abuse.

Those who argue against such regulation assert that the device is informally

regulated in a variety of ways. For example, t e principal, while competent, can ! monitor the actions of the attorney-in-fact and revoke the durable power of attorney at

any time; the attorney-in-fact is constrained by the common law fiduciary duty s/he

owes to the principal; and the threat of criminal sanction provides an effective

deterrent to abuse.

The proponents for formal regulation counter these arguments by pointing out

that: an incompetent principal clearly cannot monitor hislher attgrney-in-fact; the

I fiduciary duty means little to one who is willing to steal; and pro ecution is no I deterrent as many of the attorneys-in-fact are immediate family dembers or close

friends whom the principal is often unwilling to prosecute. Furthermore, advocates for

reform contend, if informal regulation worked effectively we would not see the abuse

that is beginning to gain public attention.

Those who wish to maintain the status quo 'allege that to regulate would be to

transform the durable power of attorney into exactly what it was designed to serve as

an alternative to-a complex, formal fiduciary relationship.

The reason for this seemingly endless debate stems from a difference in

viewpoint. The proponents of regulation see the abuse of durable powers of attorney

and call for reform, sometimes without considering the adverse effects the reform might

have on the usefulness of the device. The opponents of regulation see the utjlity of

I durable powers of attorney and maintain that +form w,ould render the device useless,

without considering that some level of regulation might be necessary to protect those

who cannot protect themselves.

Based on our survey findings, there is a need for a more balanced perspective

that recognizes both the need for reform and the negative effects that the reform may

cause if not done wisely. As one commentator remarked:

Under any of the shared or surrogate financial manageme t devices . . . abuse and exploitation of the older person may occur at the han of unethical family members who are influenced more by economic self-inter t than by their fiduciary or trust responsibilities to a dependent relative. e public policy challenge is to prevent this phenomenon from happening 'thout routinely

and counterproductive?

il imposing bureaucratic intrusions that in the majority of cases would be exaxshe

This report presents the evidence of abuse gathered through the Government

Law Center's swvey and offers an array of options for legislative and administrative

reform that could help curb durable power of attorney abuse while allowing the

mechanism to maintain its e f fdeness .

The report is written for policymakers and advocates and is intended to provide

a national perspective on durable power of attorney abuse and potential reform. Part I

introduces the subject and outlines the arguments for and against durable power of

attorney regulation. Part I1 briefly defines the durable power of attorney and the .

relationship it creates. Part III examines the history of the device. Part IV addresses

whether now is the time to take regulatory action in this area. Part V outlines the I

extent of durable power of attorney abuse as documented by the Government Law

Center survey. Part VI sets the scene for legislative options. Part VII contains a

discussion of a broad array of options for legislative and administrative action that may

help curb financial abuse of the durable power of attorney.

The underlying issue this report seeks to examine is how government can

continue to provide a mechanism-that will allow for simple, inexpensive third-party

financial management, while at the same time lessening the likelihood that those who

employ the mechanism are not subject to abuse.

11. THE DURABIE POWER OF ATTORNEY

A power of attorney is a legal document which gives an agent, also known as an

attorney-in-fact, the power to perform various financial transactions on behalf of a

principal.7 A power of attorney is considered "durable" if the agent's power is not

I terminated by the incapacity of the principal?

In most states, the durable power of attorney can only be created by a'written

instrument? In addition to requiring a written document, a small number of states

have formal execution requirements.'' For example, South Carolina requires a durable

power of attorney to be "executed and attested with the same formality and with the

same requirements as to witnesses as a will" and to be "probated and recorded in the

same manner as a deed."" However, South Carolina is an exception-the majority of

states simply require that the principal draft a written document that names an

attorney-in-fact and gives that attorney-in-fact the power to act on hisher behalf.'*

Only a few states presume that a power of attorney is durable?) Therefore, in

the vast majority of states, to make a power of attorney durable, there must be explicit

language in the document that expresses an intent to extend the authority of the

attorney-in-fact beyond the principal's competency." The phrase "this power of

attorney shall not be affected by subsequent disability or incapacity of the principal" is

commonly used to satisfy this requirement1'

In all jurisdictions, to create an effective durable power of attorney, the principal

must be a competent16 adult at the time the device is executed." Similar restrictions

generally apply to the attorney-in-fact as well.I8 In regard to how much authority the

principal can delegate to the attorney-in-fact, the law of agency (which applies to .

durable powers of attorney) prevents individuals from delegating certain "peculiarly

personal" acts.'' With respect to financial matters, such nondelegable acts include

making a will or creating an obligation to perf rm und~r a personal services contractsm 9 The majority of states, however, have- not placed any further limitations on the actions

an attorney-in-fact can take in regard to property management.2' As such, if a

principal fails to write in any restrictions when creating the durable power of attorney,

the attorney-in-fact will be given license to do most anything with the principal's

p r~per ty .~

While the attorney-in-fact is often empowered to do a gre t deal, she is not 9 compelled to do anything. The authority granted to the attorney in-fact "is normally I passive rather than mandatory, and there is no affjrmative duty to take specific

action.lm Furthermore, the attorney-in-fact who does take action is not, thereafter,

obligated to do much else. For example, typically the attorney-in-fact has no obligation

to keep records, report transactions, or keep family members informed of the actions

she has takenu

While the attorney-in-fact does have a good deal of discretionary authority,

ultimately if the principal directs himher to take action, or to refrain from taking

action, s h e must "obey the principal as long as the principal is competent!"

Furthermore, the principal, while competent, may revoke the durable power of attorney

at Finally, while the attorney-in-fact may wield great control over the principal's

property, title to all the assets remains with the pr in~ipal .~

111. A HISTORY OF THE DURABLE POWER OF ATTORNEY

k The Durable Power of Attorney Past and Present

1. The Common Law to 1%9

At common law, a power of attorney was regulated exclusively by the law of

agency.28 The law of agency provided that a power of attorney was automatically

revoked when the principal became incorn~etent.~ The authority given to the attorney-

in-fact ceased to exist after the principal's incompetency and all transactions which took

place thereafter were without legal effectsM A durable power of attorney exists where

the attorney-in-fact's authority s u ~ v e s the principal's incompetency. It is a creature of

statutory law and was not developed until the mid-twentieth c e n t . .

As early as 1950, Virginia enacted a statute authorizing a durable form of the

power of attorney?' However, for the next 19 years Virginia remained the only state

with such a statute?* It was not until the late 1960s that the concept of a durable

power of attorney began to gain widespread attention.=

In 1964, the National Conference of Commissioners on Uniform State Laws (the

drafters of the Uniform Probate Code) approved the Model Special Power of Attorney

for Small Property Interests Act. The purpose of the Act was to provide a simple and

inexpensive alternative to guardianship proceedings for -persons with relatively small

property interests. The prefatory note to the Act read:

The purpose of this model Special Power of Attorney Act is primarily to A

provide a simple and inexpensive legal procedure for the assistance of persons with relatively small property interests . . . who, in anticipation or

because of physical handicap or infirmity resulting from injury, old age, senility, blindness, disease or other related or similar cause, wish to make provision for the care of their personal or property rights or interests, or both when unable adequately to take care of their own affairs. . . .

Special features of this Model Act are that the power of attorney must be approved by a judge of a court of record, and a power will not be invalidated by subsequent incompetency of the principal.

The Act was more specific and comprehensive than later statutesY3 and was not met

with widespread acceptance. The Act, however, served as the predecessor to,both the

durable power of attorney section in the 1969 Uniform Probate Code ("UPC') and the

1979 Uniform Durable Power of Attorney Act3' In turn, these two acts have served as

models for the enactment of related legislation in many states.

2 Promulgation of the UPC - 1969

The durable power of attorney first received national prominence with the

promulgation of the Uniform Probate Code in 1969.~~ As previously noted, prior to

this landmark year, only Virginia had adopted the durable power of attorney in

statutory form." In the ten years after 1969, however, the UPC sections on powers of

attorney inspired durable power of attorney statutes in more than thirty states.%

[The] UPC sections [on powers of attorney] were designed to assist persons interested in establishing non-court regimes for the management of their affairs in the event of later incompetency or disability. The purpose was to recognize a form of senility insurance comparable to that available to relatively wealthy persons who use funded, revocable trusts. . . .39

The sections contained three things of note: (1) a provision permitting a power

of attorney to be durable;'0 (2)-a substitution of the common law rule that powers of

attorney are revoked upon the principal's death with a new rule providing that

revdcation would only occur if the attorney-in-fact (or the person with whom s/he was

dealing) had actual knowledge of the death," and (3) a provision allowing an attorney- i

in-fact to conclusively establish that s/he did not have knowledge of the principal's I

death, for purposes of disproving revocation, by signing an affidavit to that effect."

These provisions are notable for at least two reasons. First, they contained

modifications of two age-old common law rules: (1) that a principal's death ended the

authority of the attorney-in-fact; and (2) that a princip&s incompetency ended the

authority of the attorney-in-fact. As one commentator descriied, these were "the seeds

of a revolutionary concept: that a state could by legislative fiat simply reverse . . . age-

old agency rule[^]!*^ Secondly, the provisions represent the first serious attempt to

encourage extensive use of powers of attorney. The drafters of the UPC seemingly

recognized that the only way to encourage widespread use of the device was to

increase its practical utility. Ultimately, this was the beginning of what has become a I

legislative tendency to make the power of attorney easier to use. ( I

3. Adoption of the Uniform Durable Power of Attorney Act - 1979 In 1979, the National Conference of Commissioners on Uniform State Laws

acted on "a suggestion that a new free-standing uniform act [that a state could adopt

without the rest of the UPC] . . . would be welcome in many states" and developed the

Uniform Durable Power of Attorney Act.'4 In the-course of preparing the Act, an

attempt was made to improve upon the 1969 UPC power of attorney sections.4s While

14

the 1979 Act did contain a few modifications of the original UPC provisions, most of

its changes were merely stylisti~.~ For example, whereas the 1969 Act consisted of

only two sections, the 1979 Act was structured with five sections. Yet, the additional

three sections contained little that was new.

The 1979 Act did provide a lot in the way of commentary. For example, it is in

the prefatory note to the 1979 Act that the reasons for, and purpose behind, the 1969 I

UPC provisions were first provided. Additionally, the commentary accompanying the

Act resolved certain questions involving the 1969 UPC durable power of attorney

provisions that had apparently been cause for dispute.

For example, the Act "rernove[d] any doubt about the validity of a 'springing

power.""' Generally, a springing power is a power of attorney that becomes effective

only when, and if, the principal becomes incompeten~~ It is designed to allow the

principal to retain control over hisher affairs so long as she is competent and to delay

the grant of authority given to the attorney-in-fact until absolutely necessary. Prior to

1979, it was unclear whether this type of durable power of attorney was ~ a l i d . ~ The

1979 Act resolved the issue by stating that a principal could create a durable power of

attorney by drafting a written document containing the phrase: "[tlhis power shall

become effective upon the disability or incapacity of the prin~ipal."~ The commentary

to the Act noted that this "expression was designed to emphasize that a durable power

with postponed effectiveness is per~nitted.'"~

The 1979 Act was not amended until 1984. 'By that time, all fifty states had

enacted statutes permitting a principal to create a durable power of attorney.52 Two

states had durable power of attorney statutes based on the 1964 Model Special Power

of Attorney for Small Property Interests twenty-three states had statutes closely

modeled after the 1969 UPC sections on durable powers of att~rney;'~ nine other states i

contained language that echoed the 1969 language;5s and ten states had enacted the

1979 Uniform Durable Power of Attorney Actss6 The remaining states did not follow

any of the models created by the drafters of the UPC, but nevertheless provided for

the creation of a durable power of att~rney.'~

1 4. 1984 to the Present

The 1979 Uniform Durable Power of Attorney Act was amended slightly in 1984

and 1987. The effect of these amendments was to provide that a durable power of

attorney would be valid notwithstanding any lapse of time since the execution of the

document, unless the document stated a time of terrninati~n.'~

The last action taken by the National Conference of Commissioners on Uniform 1

State Laws with respect to durable powers of attorney was in 141 . At that time, the

Uniform Statutory Form Power of Attorney Act was adopted.- e Act gives P legislative sanction to a simple, non-detailed short form through which principals can

create a durable power of attorney. The Act was adopted to make durable powers of

attorney easier to execute. The prefatory note to the Act states: "[slpecial effort is

made throughout the Act to make the language as informal as possible. . . . The act as

a whole provides a practical method of granting pbe r s of whatever scope may be

ap~ropriate.'~

The durable power of attorney remains as popular today as it was in 1984. All

fifty states and the District of Columbia still have statutes authorizing, in some degree,

the durable power of att~rney.~' However, the disparity among- state statutes has

grown even wider than it was in 1984. Currently, only twenty-five states and the

District of Columbia have officially adopted a UPC designed statute!* Further, among

those twenty-six jurisdictions there are four different models in effect: the 1969, 1979,

1984, and 1987 versions.63 Finally, in addition to the disagreement over whether to

adopt a W C model (and if so, over which ond to adopt), there is difference of opinion

over other issues as well, such as: should durable powers of attorney be recorded;

should there be more stringent execution requirements; should statutory short forms

include cautionary language warning principals of the powers being conveyed; and

should certain persons be given the authority to petition a court for the purpose of

terminating the durable power of attorney? The remainder of this study will address

these questions and related issues. i I

B. The Preoccupation With Making The Durable Power Of Attorney Easier To Use

While there is significant disparity among the state durable power of attorney

statutes, a few concepts have been embraced by the majority of states. Most of these

concepts focus on how to increase the usefulness of the durable power of attorney.

However, a number of them arguably subject the durable power of attorney to

potential abuse.

1. Durability

Durability, as described in the previous section, has won approval in all fifty

states and the District of Col~mbia.~ The concept was specifically designed to make

the power of attorney a more useful device. It was a response to the problem of

powers of attorney becoming useless just when they may be needed most.65 For

example, it is quite common for a principal to create a durable power of a t t h e y

because she fears being unable to take care of hisher affairs in the future due to later

incapacity. A common law power of attorney would have been of little use to this

principal because it would have expired at precisely the point in time at which she

desired assistance. There is no denying that durability has proved beneficial with

respect to overcoming this problem.

However, durability does something else as well--it increases the opportunity for

an unscrupulous attorney-in-fact to abuse the relati~nship.~~ Prior to the emergence of

durability, any attorney-in-fact who attempted to abuse a power of attorney risked

18

discovery and confrontation by hisher competent principal. However, an incompetent

principal may not only be unaware of abuse but may lack legal capacity to challenge an

attorney-in-fact's actions6' The common law rule, extinguishing the power of attorney

upon incompetency, was "based on the premise that because the principal was no

longer able to oversee the actions of his agent, a continued agency relationship was

imprudent .la

This is not to suggest that durability is a poor concept, but rather to @$light

the inherent conflict with powers of attorney--making them easier to use often involves

making them easier to abuse. At the current time, the conflict has been addressed in a

manner that favors maximizing use while disfavoring prevention of potential abuse.

2 Statuto'y Short Forms

The popularity of the statutory short form power of attorney has "taken off

within the last several years.'" Between 1983 and 1989, Alaska, California, Illinois,

Minnesota, Nebraska, New Mexico, and North Carolina adopted a statutory short form

statute.70 More recently, Montana, Wisconsin, and Texas authorized the use of a

statutory short form power of attorney, raising the number of states who have granted

such authorization to fifteen (the five other states are Colorado, Connecticut, Maine,

New York, and Pennsylvania)."

Similar to durability, the statutory short form has emerged as a concept

fashioned to enhance the utility of powers of attorney. With the statutory form, the

focus is on ease of execution:

A statutory short-form power of attorney is just as its name describes. The form itself is set out in the statute. It is also short. Instead of spelling out the powers of the agent in detail, a statutory short-form contains a series of blanket phrases such as "real estate transactions" or "stock and bond transactions." . . . [Tlhe principal delegates powers to the agent merely by initialing or checking a box next to a phrase, or, in other variants, by simply not striking a p h r a ~ e . ~

As indicated, a statutory short form makes the durable power of attorney about

as easy to execute as possible; the principal need only follow the simple execution

I brocedures and fill in the blanksan Furthermqre, the forms are very accessible. They

can usually be obtained by the general public 1 hrough stationery stores at a minimal

cost." The advantage is that, in a legal world normally marked by complexity and

I expense, a durable power of attorney can be created very simply and cheaply?'

The disadvantage, however, is that the statutory short form enhances the

I potential for abuse of durable powers of at t~rney?~ It does so by making it easier far

individuals to create a durable power of attorney without legal counsel."

To function as an alternative to an attorney-prepared document, the statutory form must, somehow, fulfill the attorney's counseling function. The only advice the most recent forms give is, by and large, a warning that the granted powers are sweeping and a suggestion th seek independent advice if questions arise.%

Even in Illinois, a state that has a detailed warning,79 a commentator recognized that

"ready-made forms may facilitate control by an unscrupulous person over the affairs of

The basic issue presented by the statutory short form is this: can a simple,

standard form provide adequate safeguards against abuse, and if not, does the

usefulness of the form outweigh the risk of abuse? Recently, Indiana answered both

these questions in the negative and "specifically rejected [the statutory short form] . . . because of the potential abuse [ofj individuals executing powers without legal advice.'"'

However, the general trend is to the contrary," focusing again on the use rather than i

abuse of durable powers of attorney.

3. Protectkg Third Persons

A frequent concern raised about durable powers of attorney is that third persons I

(e.g., banks) may not honor themma seeming$, a third party's hesitation comes fiom

the fear that they may be transacting with a person who no longer has, or never had,

the authority to transact on behalf of the absent principal.

States have attempted to alleviate such fears by reducing, or eliminating, the

risks third parties face when relying on durable powers of attorney. A common state

statutory provision permits third parties to rely on the ,validity of a durable power of

attorney so long as they do not have actual knowledge of the principal's death." Such

a rule protects a third party who has engaged in what would no ally be a legally

ineffective transaction-for, without the rule, the authority of the t ttorney-in-fact (with

whom the third party has transacted) to act on behalf of the principal is revoked upon

the principal's death."

The efforts to induce third-party reliance reflect the ongoing concern with

improving the usefulness of durable powers of attorney, since as a practical matter, a

durable power of attorney is useful only to the extent that third persons accept it as

valid.& As one commentator noted, "if third parties are subject to liability, they will

21

hesitate to deal with agents and thus make the power ~ s e l e s s . ~ ~

The situation would not be problematic if the provision above was the only one

adopted to protect third parties. However, a few states have sought to increase the

effectiveness of durable powers of attorney even further by directing third parties to

honor them.88 While this may seem burdensome to third parties at first glance, it, in

fact, provides relief by absolving them of liability they might have faced had the

durable power of attorney been invalid. The burdens (and risks) are not on the third

party in this situation, but rather on the principal.

It is important to note that there are individuals who may understand, and are

willing to accept, the risks involved with using a durable power of attorney, in order to

plan for future incapacity. Such an individual may experience frustration in finding that

certain third parties refuse to recognize the durable power of attorney s/he has created.

For example, "many banks refuse to accept a power of attorney that is not executed on

the bank's own forms, and some title companies will not accept a power that is more

than six months old or a general power that does not specifically refer to the property

in que~tion."~~ In light of such practices, for some principals a rule directing third

parties to honor durable powers of attorney may be desirable. The problem is that

such a rule, while helping some principals, potentially subjects many others to abuse.

One commentator recognized this point: "[while] our agency system might

operate more simply in the marketplace if . . . third parties would be protected in

relying on anyone who says he is an agent . . . such a rule would offer too little

protection to the prin~ipal . '~

4. Springing Powers

Statutes in 43 states have language expressly authorizing springing durable

powers of attorney," and no state statute expressly precludes the use of this device.=

As mentioned above, many principals execute a durable power of attorney in

anticipation of future incapacity. In such a situation, a principal may wish to retain

total control over hisher affairs while she remains ~ompetent.'~ A standard durable I

power of attorney is generally effective upon execution, sometimes creating a concern

over attorneys-in-fact who may take action "prematurely while the principal has capacity

and desires to make all decisions.'@"

The springing power, which generally becomes effective only when, and if, the

principal becomes incompetent, calms this concern by allowing a principal to retain

control over hisher affairs as long as she can.%

In one sense the notion of a springing power may be viewed as a safeguard

against abuse.% By delaying the commencement of the attorney in fact's authority until

some later date, the principal narrows the period of time during which she may be

subject to abuse. However, it does not appear that the springing power is considered

as a safeguard by those who utilize it. If a principal does not trust the attorney-in-fact

while she has the ability to supervise and, if necessary, remove the attorney-in-fact,

why would the principal give control to that person during incompetency when she

cannot monitor the attorney-in-fact's acti~ities?~~ Rather than employed as a safeguard,

it appears that the springing power is utilized primarily because many persons wish to

control their own affairs as long as possible.*

It is true that the springing power, unlike the other concepts descriibed in this

section, does not augment the effectiveness pf a durable power of attorney. It does

not hamper that effectiveness either though,* it merely delays the effectiveness until a i

contingency is met.

5. The Problem

All of these concepts have been, by and large, successful. Today, the durable I

power of attorney is one of the simplest and lhast expensive estate planning tools.lm

It continues to provide an important alternative to individuals who do not require, or

desire, more formalized guardianship proceeding^.'^' In this sense the durable power of

attorney has achieved the previously-stated objective of the National Conference of

Commissioners on Uniform State Laws who created it: "to assist persons interested in

establishing non-court regimes for the management of their affairs in the event of later

incompetency or disability."lb2

However, in fulfilling this objective a door has been inadv)ertently opened. By

focusing primarily on improving the usefulness of durable power of attorney, the i majority of states have failed to create adequate safeguards, thereby creating the

potential for abuse. The point here has not been to criticize past legislative actions,

but rather to highlight the singular direction they have taken. It is noted that this

direction may have been appropriate in the past. However, in light of the recent

publicity surrounding durable power of attorney abuse, and the findings in this study,

the question now is: should we redirect our focus and lend some legislative and

administrative attention to addressing the problem of abuse?

W. REGULATING DURABLE POWERS OF ATTORNEY: IS IT TIME TO TAKE ACI'ION?

Probate court officials, social workers, and others who work with the i

elderly have expressed growing concern that the durable power of attorney and other management devices are increasingly employed as the least-restrictive alternative. They argue that these less restrictive alternatives leave the frail elderly defenseless and actually invite abuse. . . ."Im One commentator has stated that the fact that "most states have not adopted

intended to be an alternative to more formal fiduciary relationships, such as

strict rules [regulating the use of durable powers of attorney] is as it should be."lm

guardianships, it would be unfortunate to overly regulate the device.lm Another

This commentator further asserts that because

commentator stated that "adding complex procedural . . . burden[s] may be worse than

the durable power of attorney is

the risk of abuse. Stated another way, a durable power of attorney can be made easy

to use and abuse, or hard to use and abuse, but on balance . . . making the durable

power of attorney easy to use seems to make sen~e."'~

Those who argue that further regulation of the durable p*r of attorney is

unnecessary admittedly premise their argument on the fact that t e reported cases P involving abuse of durable powers of attorney are so few.'m However, at a recent

elder law symposium one of the participants noted that "[wlithout oversight and

supervision, there is great potential for abuse of financial powers of attorney, and a

growing number of problems are being doc~rnented."'~ In Philadelphia, for example,

the District Attorney's Office recently began a "crackdown" on durable power of

attorney abuse--officials were investigating five "power of attorney cases where elderly

women have lost life savings ranging from $50,000 to $150,000."lo9

The perception of the durable power' of attorney as a "license to steal"

apparently has ~alidity."~ The responses to the Government Law Center survey

discussed in the following section tend to contribute to the notion that durable power

of attorney abuse is fairly extensive. These findings tend to rebut the argument that

further regulation of durable powers of attorney is unnecessary, and pave the way for

the policy considerations made in the last sectipn of this report. I

V. RESULTS OF GLC SURVEY

To further explore the perception that durable power of attorney abuse may be

a significant but often unpublicized occurrence, the Government Law Center (GLC)

designed a survey to assess the incidence of abuse and gauge the desirability of specific

potential reforms. A copy of the survey is included as Appendix I.

k The Survey Sample: Demographics and I

Research Methodology

The survey was distributed nationally to a network of attorneys who work with

the elderly, social service providers to the elderly, and administrators and staff persons

of Area Agencies on Aging. District attorneys and surrogate judges"' within New York

were also surveyed. Dissemination was accomplished through newsletters of The Elder

Law Section of the New York State Bar Association (NYSBA) and American

Association of Retired Persons-Legal Counsel for the Elderly (AARP-LCE),"* and by

direct mail nationally to the Area Agencies on Aging and to New York district

attorneys and surrogate judges. Approximately seven thousand surveys were printed

and disseminated. The distniution was one time only with the burden on the

newsletter reader to fill out the survey and mail it back.

Of the 410 persons returning the survey, 199 (49%) identified themselves as

attorneys and 130 (32%) as social workers, ombudsmen for the elderly, or Area Agency

on Aging administrators or staff persons. Thirteen of New York's sixty-two county

district attorneys and twenty-six out of seventy-five New York surrogate court judges

responded comprising three percent and six percent respectively of the survey sample.

Forty-two additional responses (10%) were received from a broad array of persons

such as paralegals and financial planners. [See Graph I.] Responses were received

from 46 states plus the District of Columbia.l13 Results of the survey were first

analyzed by treating all the responses together and then by comparing responses from

attorneys with those of social service providers.

B. Incidence of Abuse

Respondents were asked their opinions as to the frequency of durable power of

attorney abuse and whether such abuse is a problem that merits further legislative

attention or legal action.

Ninety-four percent of survey respondents believe abuse occurs either

occasionally or frequently. Twenty-two percent believe that durable power of attorney

abuse occurs frequently and 72% believe it occurs occasionally. Another three percent

believe that abuse occurs rarely, and three percent believe abuse never occurs. [See

Graph 21

Grouping responses by profession, 31% of the social service group versus 14%

of attorneys stated that abuse of durable powers of attorney occurs frequently, while

68% of social service professionals and 77% of attorneys view the abuse as occasional.

[See Graph 31

ABUSE AND THE DURABLE POWER OF ATTORNEY: Options for Reform

Graph 1

NYS Surrogate Judaes 6%

Miscellaneous I I

1 0%

SURVEY RESPONDENTS

ABUSE AND THE DURABLE POWER OF ATTORNEY: Options For Reform

Graph 2

Rarely Never 1

INCIDENCE OF ABUSE (All Respondents)

. .


Graph 3

Never Freauent lv

Bttornevs Never

social Service professional^

INCIDENCE OF ABUSE (Comparing Attorneys and Social Services Professionals)

C. Do the Benefits of a Durable Power of Attorney Outweigh the Risk of Abuse?

Respondents were asked whether they believe that the benefits of a durable

power of attorney outweigh the risks of financial abuse."' Overall, 20% of respondents

believe benefits always outweigh risk of abuse, 77% believe the benefits sometimes

outweigh the risk, and three percent answered that the benefits never outweigh the

risk. [See Graph 41 Twenty-eight percent of attorneys versus 13% of the social service

providers believe the benefits always outweigh the risks of abuse.

D. Should Something Be Done?

Eighty-two percent of the survey respondents believe this issue merits further

attention: Thirty-one percent of the respondents strongly agree with this statement,

and 51% agree. Fifteen percent disagree with the notion that something should be

done and three percent strongly disagree that durable powers of attorney abuse merits

further attention. [See Graph 51

Support for further attention to this issue is strong from both groups, particularly

social service providers: 44% of social service providers strongly agree and 52% agree

for a near consensus of 96%. Fw percent of attorneys agree that the problem of

abuse merits further attention and 22% would strongly agree, for a combined 72%

advocating further attention to the problem.


Graph 4

Never

DO THE RISKS OF A DURABLE POWER OF ATTORNEY OUTWEIGH THE RISKS

(All Respondents)


Graph 5 i

Disagree / Strongly Disagree

DOES THE ISSUE OF DURABLE POWER OF ATTORNEY ABUSE MERIT FURTHER

ATTENTION? (All Respondents)

Even though support for further attention is highly positive from both groups,

there is some disparity. Twenty-eight percent of the attorneys do not feel durable

powers of attorney abuse is serious enough to merit attention, while 44% of the social

service providers strongly believe that something needs to be done in response to the

abuse. Furthermore, there was, as documented above, a moderate degree of disparity

between the two groups with regard to other questions as well.

These differences of opinion may be explainable by the difference in the types

of encounters with individual clients experienced by the two groups: Attorneys in

private practice, in general, are sought out by financially-able, more sophisticated

individuals seeking legal counsel, often before a problem exists or reaches a crisis level.

In contrast, social service providers often are called in because of an existing problem

or crisis to assist clients who may be less financially able and possibly less sophisticated

and who may not have had the advantage of expert legal advice and assistance in

preparing a durable power of attorney. Furthermore, the settings for the two may

differ significantly. The typical attorney-client consultation takes place in the attorney's

office, while the social worker-client encounter might be in the client's home or in a

nursing home. The difference in settings may account for the disparity in attitudes

between the two groups. The social service providers may be privy to more accounts

of abuse by virtue of their presence in the residences of elderly principals.

Written comments from respondents on this issue ranged from, "I have a feeling

that this is a serious problem which occurs more often than is reported," and, "[tlhe

victimization of the elderly should be a high priority for our legislative bodies and the

36

courts," to "[als bad as the abuses are, the present system preserves the right of a

person to choose who will administer hisher affairs without bureaucracy and costs," and

"[dlo not meddle in this area with a bushel basket of administrative requirements.

Controls can be imposed at execution with careful planning between principal and

hisher attorney."

Thus, the GLC survey indicates that while there are those who maintain that no

changes are warranted in statutes regulating the use of a durable power of attorney,

the majority of respondents believe that abuse does occur and that further attention is

merited to seek protections against this kind of financial exploitation.

E Personal Knowledge of Abuse

The last section of the survey was designed to ascertain whether respondents

had actually encountered durable power of attorney abuse. The information came

from personal experience, client experience, or incidents recounted by persons with

whom the respondents associate. Two-hundred seventy respondents, or 66% of the 410

persons replying to the survey, had encountered some degree of durable power of

attorney abuse. Of those, 28% had encountered such abuse on one to two occasions,

34% on three to five occasions, and 16% six to ten times. Twenty-two percent have

experienced this problem more than ten times. [See graph 61


Graph 6

11 or More Occasions

Occasions (1 6%)

INCIDENCE OF PERSONAL KNOWLEDGE OF ABUSE

(67% of Respondents had encountered abuse arising from a durable power of attorney)

Sixty-eight percent of attorney-respondents experienced at least one incident of

abuse, and 74% of the social service professionals indicated the same. Twenty-two

i percent of the attorney-respondents and 24% of the social service-respondents reported

knowledge of ten or more incidents.

Of the 270 incidents of abuse described by respondents, 64% were perpetrated

by an immediate family member and 19% by other relatives. Long-time friends and

attorneys comprised six percent and three perdent of the abuses, respectively. Newly-

made acquaintances accounted for seven of the abuse. [See Graph 7]

In 154 of the 270 incidents, or 57%, the abuse was accomplished while the

principal was either still competent or had not been adjudged incompetent.l15

Respondents reported that in 91 situations (or 35% of the time), the principal had lost

capacity. In 25 occurrences (nine percent), the principal's capacity was questionable or

undetermined.

Respondents were asked to assess the severity of abuse by approximating a I

percentage of assets affected. In 14% of the situations reported, less than 25% of the

assets were misappropriated, and in 12% approximately 25% of I ssets were taken. In

19% of the situations related by survey respondents an estimated 50% of assets were

misused. Respondents estimated that in 48% of the cases, approximately 75% or more

of the principal's assets were exploited. [See Graph No. 81


Graph 7

Newly-made Long Time Friend Attorneys Acquaintances r

-,

ibe

PERPETRATORS OF ABUSE (Of the 270 Incidents Related by Respondents)


Graph 8

More than 75% of Assets Affected Unknown

50% of Assets Affected (12 %) (1 9%)

SEVERITY OF ABUSE (OF 270 INCIDENTS)

Respondents were also questioned as to whether the abuse led to criminal

prosecution andlor a civil lawsuit. If the abuser was criminally prosecuted, the

respondent was asked if a conviction resulted, and if civil litigation took place, whether

there was a financial recovery. Thirty-one out of 270 reported instances of durable

power of attorney abuse resulted in criminal prosecution. Of the 31 criminal

prosecutions, 15 or 48% of those prosecuted resulted in conviction. An additional 18

cases were pending at the time the survey was returned. Eighty-five of the 270 cases

led to civil litigation. Seventy-two cases result 4 d in some financial recovery of the

principal's assets. In some of these situations, the principal's assets were recovered by

confronting the abuser and without resorting to civil litigation.

Finally, respondents -we= asked whether the abuse they encountered had been

reported in the popular media. Only 23, or eight percent, of all cases documented in

this survey were reported by the media. The fact that only eight percent of the

incidents were reported in the media would indicate that public perception of this

exploitation-as such perception would be gleaned from media re 1 orts--underestimates

actual abuse.l16 Such a finding suggests that durable power of at orney abuse may be I more widespread than initially believed.l17

VI. SETTING THE SCENE: THE NEED FOR LEGISLATIIVE OPTIONS

Based on the foregoing findings of the GLC survey, to wit, durable power of

attorney abuse does occur and that the problem warrants further investigation,

legislative safeguards to prevent abuse should be considered.

Proposed safeguards against durable power of attorney abuse can be viewed as:

(1) those making it more difficult for an attorney-in-fact to misuse the principal's assets; I

(2) those that would improve the ability of the' principal or a third party to detect the

misuse; (3) those that would facilitate prosecution; and (4) those designed to punish the

wrongdoer. While some safeguards would clearly fall into one category, in general

there is overlap between options that would deter abuse, aid in detection, and facilitate

prosecution.

Before considering specihc options for reform, it is important to note that,

absent any legislation action, durable power of attorney abuse wiu probably continue in

the future, only with greater frequency. The instances of abuse eing reported at

present may represent only a fraction of potential abuse cases in 1 the future. The

reasons for this are two-fold: First, it is impossible to assess how many durable powers

of attorney exist for immediate or future use. Many of the documents already executed

since durable powers first were authorized begbung in 1%9 may not yet have been

put to use. Second, the baby boomers are quickly approaching senior citizen status

and can be expected to utilize durable powers of attorney in preparation for future

incapacity. Thus, while the durable power of attorney is already an increasingly

43

popular device, its actual usage could multiply very quickly in the near future, creating

greater opportunities for abuse.

When one considers this potential for abuse in light of the extent to which

durable power of attorney abuse is already occurring, and because few of the legal

questions raised in state courts have been codified and incorporated into durable power

of attorney statutes, it further behooves state legislatures to begin examining this

question.

To determine the views of those working with elderly clients regarding potential

reforms, respondents were asked to review a list of possible reforms or safeguards to

combat durable power of attorney abuse and to indicate whether they believed these

ideas might be helpful or impractical in curbing abuse. These choices included:

* imposing harsher than ordinary penalties on abusers;

* - creating a central registry listing attorneys-in-tact;

* mandating recording requirements;

* requiring notification of principal or designated third party for significant transactions;

* requiring a waiting period between execution and use of the durable power of attorney;

* requiring appointment of a third party to act jointly with the agent or periodically check on the agent;

* requiring the agent to file an annual accounting with a third party or the court (if the agent were unable to request such an accounting);

* requiring the agent be bonded;

* escrowing the power of attorney until needed; and

* requiring that a third party be given the power to revoke the authority if the principal is incapacitated and cannot do so.

The survey responses and respondents' additions to the list of potential safeguards will i

be discussed later in this section.

Several respondents to the survey mentioned that the best way to prevent power

of attorney abuse is by carefully choosing a trustworthy attorney-in-fact. Others

thighlighted the desirability of personal autonomy and that the durable power of I

attorney gives an individual autonomy in choojing an agent to perform financial

transactions on hisher behalf. However, in some instances, it is the family or others

close to the principal who intervene to help make the choice of agent while the elderly

principal is legally considered-competent but in reality may be less than able to make a

clear and thoughtful choice or object to the choice of others. Further, many survey

respondents expressed the concern that a frail, elderly person may not understand what

she is being asked to sign when presented with the durable power of attorney I

document to execute. In fact, a near stranger might persuade a hospital or bed-ridden

individual to appoint himher as an attorney-in-fact. The executi n of a durable pomr P of attorney under such circumstances may not be in the principal's best interest. If

execution would result in a trustworthy agent managing the principal's financial affairs

when she is no longer able, this could be more desirable than judicial proceedings for

guardianship. Conversely, signing a durable power of attorney that would allow an

unscrupulous agent carte blanche power over the principal's affairs is not.'18

Even if a fully-competent principal wisely chooses an attorney-in-fact, judicious

appointment of an agent is still no guarantee that the power will not be abused.

However, several respondents mentioned that abuse is less likely when the principal is

thoroughly advised of the "power" conveyed through a durable power of attorney.ll9

Respondents also commented that an attorney-in-fact who lacked knowledge as to an

agent's fiduciary duties may be more likely to conduct questionable transactions that

result in financial exploitation of the principal. Therefore, legal advice and education

of both the principal and attorney-in-fact are important in maximizing prudent choices

and compliance with fiduciary responsibilities.

The following section presents possible safeguards for deterring, detecting,

prosecuting, and punishing financial abusers of elderly and incapacitated persons.

These safeguards range from instituting efforts to educate principals and attorneys-in-

fact to highly intrusive, restrictive regulations such as requiring court monitoring. While

pthiapPeal of the durable power of attorney is that it operates independent or"

authority and monitoringlm and is thus simple to execute and implement, it is these

desirable features which create opportunities for abuse. Thus, many of the legislative

options contained in the next section are offered because of their ability to decrease

the incidence of abuse without greatly impacting the useNness of the durable power of

attorney. Safeguards that will not be burdensome to the majority of attorneys-in-fact,

who serve without incident, are desired.

VII. ANALYSIS OF LEGISLATIVE OPTIONS TO SAFEGUARD AGAINST

DURABLE POWER OF ATI'ORNEY ABUSE

Legislative Option #1

STATE DURABLE POWER OF A'ITORNEY STATUTES SHOULD BE AMENDED TO INCLUDE FORMAL EXECUTION REQUIREMENIS.

Mandating formal execution requirements "such as witnessing and notarization

should be encouraged as a way of pressing home the legal sigruficance of the durable

po~er."'~' Additionally, requiring witnesses and notarization means that third parties

are present when a durable power of attorney is executed. This may help prevent

coercion or undue influence on the principal.

Thi6-five states plus the District o f Columbia speclfy no execution requirement

for the durable power of attorney,lP and thus the principal's signature is all that may I

I be needed to grant this broad, sweeping power. The U n E o ~ W e 3 5-501

stipulates only that the document be "in writing" and would allow even an unsigned

document to be a valid durable power of attorney.'" For purposes of this report, the

authors will consider that execution requirements include witnessing the principal's

signature and acknowledgment (notarization) of the witnesses' affidavits attesting that

the principal is known to them and is executing a durable power of attorney.124

Of those states with execution requirements, some statutes require execution

according to will or deed requirements, some merely specify the need for notarization,

I and still others require notarization only if the durable power of attorney is to be

1 recorded. South Carolina law requires that the durable power of attorney be executed

in the same manner as a will, (i.e., signed by the principal in the presence of two adult

witnesses) and further requires the documeqt be recorded.'=

Connecticut, Missouri, and New Hampshire require that a durable power of

attorney be executed with the same formalities as a deed.'26 New York, likewise,

requires acknowledgment "in the manner of a conveyance of real property" but does

not require recording.ln Indiana requires that the durable power of attorney be

notarized.lZ8 Indiana enacted this requirement as a safeguard to ensure that it could be

recorded.'" Minnesota requires the document1 be notarized only if the principal is

unable to sign.13" Some states allow but do not require that the durable power of

attorney be acknowledged and then recorded.13'

In California, Illinois, Minnesota, New York, Pennsylvania, and other states132

that have authorized a statutory short form durable power of attorney, little or no

formal execution is required, and as these forms may be readily purchased, legal

counsel is often not obtained. Indiana decided against providing a statutory short form

I of the durable power of attorney "because of the potential abuse, [of] individuals

executing powers without legal advice."'=

Requiring two disinterested witnesses, consistent with the requirement for the

execution of a will, plus notarization would formalize the execution of the durable

power of attorney and may lessen the chance that a dishonest agent will obtain a

durable power of attorney from a vulnerable principal without the knowledge of third

persons. In the instances where the signing of the durable power of attorney is not

initiated by the principal but is sought by a third party, having formal execution

48

requirements may help ensure that the principal has the requisite capacity at the time

of execution and may also prevent undue influence or coercion.

Formal execution procedures would not penalize a principal who is executing a

durable power of attorney drafted by a lawyer,lM as is the case when the power of

attorney is part of a comprehensive estate plan, since the lawyer could easily help the

principal satisfy the execution requirements. Additionally, requiring that the power of

attorney be notarized ensures the ability to recbrd the document. (The benefits of

recordation will be discussed later in this report.)

While execution requirements may present no burden to principals completing

the power of attorney with the assistance of a lawyer, the burden of formal execution

requirements would likely be greater for a principal who is signing the document

without the assistance or benefit of legal counsel. Particularly if frail or incapacitated,

it may be difficult to obtain the services of a notary public or find competent witnesses

who can accommodate the principal's needs. However, this prinaipal may be more apt

to lack understanding of the import of the document and may aldo be more vulnerable

to coercion, and thus execution requirements may serve as a safe IP ard to abuse.

Formal execution requirements could be modeled after the South Carolina

statute that requires the durable power of attorney to be executed in the same manner

as a will: The durable power of attorney should be signed in the presence of two

disinterested, adult witnesses (i.e., not the agent or anyone who is a known or

anticipated beneficiary under the principal's will) and acknowledged by a notary

p~bl ic . '~

Therefore, while formal execution requirements would not make the signing of

a "store-bought," pre-printed form on a par with the oversight provided by a lawyer

when s h e prepares a custom-drafted durable power of attorney for a client, having

such a requirement may provide more protection for principals who are executing such

a document without legal assistance.


STATES SHOULD INCLUDE SIMPLE CAUTIONARY LANGUAGE IN ALT., PRE- PRINTED POWER OF A?TORNEY FORMS WARNING PRINCIPALS OF THE POWERS BEING CONVEYED.

As previously noted, a pre-printed statutory short form or other power of

1 attorney form1% may be purchased and executed in a number of states, allowing a

, principal to effectuate a durable power of attorney without professional legal counsel.137

Such a principal may be unaware of the extent of power conveyed by the document

and may not realize that in the wrong hands, a durable power of attorney makes it

very easy for an unscrupulous agent to engage in financial exploitation. This principal

may sign the document without realizing or understanding the duty of care required of

the agent, that the document can be revoked, and that the principal should seek legal

advice if she lacks understanding.

In general, the language in a statutory short form power incorporates by

reference the statute's lengthy explanation of the powers. However, most non-lawyers

purchasing such forms are not knowledgeable of the details, nor the ramifications of

the statute, and might not research the statute and read the entire text.

Based on these considerations, an argument could be made that durable powers

of attorney should not be executed without legal advice. However, this would not be in

keeping with the spirit of the Uniform Act, to wit, making the durable power of

attorney an inexpensive and accessible device for the public. Therefore, clear

cautionary and explanatory language should appear on every pre-printed form to help

educate principals and attorneys-in-fact as to the powers conveyed and the fiduciary

5 1

relationship undertaken by the attorney-in-fact.

While some might argue that there would be a decrease in the number of those

who might seek legal advice if there is some further explanation incorporated into the I

form itself, those wanting legal advice would probably do so with or without an

accompanying explanation, and the plainly-worded explanation would serve a valuable

purpose to the others. Further, some might argue that a caution and explanation will

add to the cost of the pre-printed document. However, additional cost, if any, would

be minimal compared to the expense of durab i e power of attorney abuse.

Some states do try to raise the consciousness of principals by mandating

inclusion in the form of a "notice" or caution about the breadth of the power(s) that

might be granted. For example, California requires that a pre-printed durable power

of attorney contain the following caution for those who are executing the document

NOTICE: THE POWERS GRANTED BY THIS DOCUMENT ARE BROAD AND SWEEPING. THEY ARE EXPLAINED IN STATUTORY FORM POWER OF ATTORNEY ACT' SECI'IONS 2475-2499.5. INCLUSIVE.) IF YOU THESE POWERS, OBTAIN COMPETENT DOES NOT AUTHORIZE ANYONE TO MAKE MEDICAL HEALTH-CARE DECISIONS FOR YOU. YOU MAY REVOKE THIS POWER OF ATTORNEY IF YOU LATER WISH TO DO SO.'%

Wisconsin's caution reads:

NOTICE: THIS IS AN IMPORTANT DOCUMENT. BEFORE SIGNING THIS DOCLTMENT, YOU SHOULD KNOW THESE IMPORTANT FACT'S. THE PURPOSE OF THIS POWER OF ATTORNEY IS TO GIVE THE PERSON WHOM YOU DESIGNATE (YOUR "AGENT") BROAD POWERS TO HANDLE YOUR PROPERTY, WHICH MAY INCLUDE POWERS TO PLEDGE, SELL OR OTHERWISE DISPOSE OF ANY REAL OR PERSONAL PROPERTY WITHOUT

ADVANCE NOTICE TO YOU OR APPROVAL BY YOU. THE POWERS WILL EXIST EVEN AFIER YOU BECOME DISABLED, INCAPACITATED OR INCOMPETENT UNLESS YOU STRME 'I'HAT PROVISION. THE POWERS THAT YOU GIVE YOUR AGENT ARE EXPLAINED MORE EULLY IN SECTION 243.10 OF THE WISCONSIN STATUTES. THIS DOCUMENT DOES

i

NOT AUTHORIZE ANYONE TO MAKE MEDICAL OR OTHER HEALTH CARE DECISIONS FOR YOU. IF THERE IS ANYTHING ABOUT THIS FORM THAT YOU DO NOT UNDERSTAND, YOU SHOULD ASK A LAWYER TO EXPLAIN IT TO YOU.1B

The Illinois statutory short form contains the most detailed warning for the principal. It includes:

the purpose of the durable powel of attorney;

a short explanation of some of the powers granted;

an explanation of the duty of care owed by the agent (including the duty to keep records), if the agent chooses to act under the instrument;

that a court can revoke the durable power of attorney if the agent is acting improperly;

that the principal may name a successor agent but not a co-agent;

that the power of attorney is presumed durable unless otherwise stated in the document; and

the admonition to seek legal counsel if the princip does not understand the powers being conveyed. I/

The notice reads:

NOTICE: THE PURPOSE OF THIS POWER OF ATTORNEY IS TO GIVE THE PERSON YOU DESIGNATE (YOUR "AGENT) BROAD POWERS TO HANDLE YOUR PROPERTY, WHICH MAY INCLUDE POWERS TO PLEDGE, SELL., OR OTHERWISE DISPOSE OF ANY REAL OR PERSONAL PROPERTY WITHOUT ADVANCE NOTICE TO YOU OR APPROVAL BY YOU. THIS FORM DOES NOT IMPOSE A DUTY ON YOUR AGENT TO EXERCISE GRANTED POWERS; BUT WHEN POWERS ARE EXERCISED, YOUR AGENT WILL HAVE TO USE DUE CARE TO ACT FOR YOUR BENEFIT AND IN ACCORDANCE WITH THIS FORM AND KEEP A RECORD OF RECEIPTS, DISBURSEMENTS AND SIGNIFICANT ACTIONS TAKEN AS AGENT. A

COURT CAN TAKE AWAY THE POWERS OF YOUR AGENT IF IT FINDS THE AGENT IS NOT ACTING PROPERLY. YOU MAY NAME SUCCESSOR AGENTS UNDER THIS FORM BUT NOT CO-AGENTS. UNLESS YOU EXPRESSLY LIMIT THE DURATION OF THIS POWER IN THE MANNER PROVIDED BELOW, UNTIL YOU REVOKE THIS POWER OR A COURT ACI'ING ON YOUR BEHALF TERMINATES IT, YOUR AGENT MAY EXERCISE THE POWERS GIVEN HERE THROUGHOUT YOUR LIFETIME, EVEN AHER YOU BECOME DISABLED. THE POWERS YOU GIVE YOUR AGENT ARE EXPLAINED MORE FULLY IN SECI'ION 3-4 OF THE ILLINOIS "STATUTORY SHORT FORM POWER OF ATTORNEY LAW' OF WHICH THIS

, FORM IS A PART (SEE THE BACK OF THIS FORM). THAT LAW EXPRESSLY PERMITS THE USE OF ANY DIFFERENT FORM OF POWER OF ATTORNEY YOU MAY DESIRE. IF THERE IS ANYTHING ABOUT THIS FORM THAT YOU DO NOT UNDERSTAND, YOU SHOULD ASK A LAWYER TO EXPLAIN IT TO YOU.'&

Although a notice or caution may not prevent a dishonest agent from abusing

the durable power of attorney, it may serve to alert the principal as to the amount of

authority being conveyed to another and remind the agent of the statutory responsibility

owed to the principal.

One commentator noted that the "effect a warning will have on lay persons who

intend to execute a durable power is difficult to tell. The warning may deter them

from doing anything. This result would be unfortunate because a guardianship, with all

its disadvantages, may eventually be necessary. On the other hand, the warning may

cause lay persons to go to a lawyer, where presumably they will learn about the pitfalls

of guardianship and execute a well-drafted durable p~wer!'~"

Words of caution such as those required in lllinois should be placed at the top

of the durable power of attorney document. The warning should be in large type, so

that it can be easily read. The caveat here is that principals with failing eyesight may

not be able to read normal-sized print; some may not be able to read beyond

54

rudimentary levels; and some may have no reading skills. Thus, the words of caution

should be written at an elementary reading level and furthermore should be read aloud

to the principal as part of the formal execution ceremony recommended above.

In addition to words of warning cautioning the principal, legal terms of art

included in the form should be explained. Explanations should accompany each pre-

printed form sold to the general public either on an attached sheet or on the form

itself. Explanations should include definitions d words such as "jointlv and "severally"

in understandable terms. Even more desirable would be to eliminate the word

"severally" and substitute the word "separately" as California has done in its statutory

short form,142 since this is a legal term of art that is not understood by the average

person.

Additionally, a short explanation of what each power "might" include may also

- - be helpml to tne princip ana the agent. C I . . . .. l n is snoula ,nor ~e as dctaifed-

statute, but should give a brief overview of what may be done un,der the authority of I

the instrument. Lengthy explanations should not be incorporated' into a statutory short

form, but could be attached to the form when sold. Also, if the I tate statute is silent

as to recording or revocation of the instrument, a short explanation of what is

permissible and the ramifications thereof would be instructive.

Because advance directives such as durable powers of attorney for property (and

health care) are becoming widely used to plan for future incapacity and as alternatives

to guardianship proceedings, public policy goals should focus on educating principals

and their agents as to the implications of such legal instruments and not leave

55

understanding of these documents to chance. Having enlightened principals choosing

competent agents saves public resources to remedy the acts of incompetent or

dishonest agents.


WHEN USING A STATUTORY DURABLE POWER OF ATI'ORNEY FORM, REQUIRE THAT THE PRINCIPAL m T I V E L Y SIGNIFY THE POWERS S/HE WISHES TO CONVEY TO THE A'ITORNEY-IN-FACT RATNER THAN TO ELIMINATE THOSE POWERS NOT WANTED.

There are different methods of choosing the powers to be granted to the

attorney-in-fact under a statutory short form durable power of attorney. One method,

which is used by New York, requires the principal to eliminate any powers s/Fe does

not wish to convey to the attorney-in-fact. The principal does so by striking out the

subdivision (drawing a line through the text) and initialing a box opposite that

a~th0ri ty. l~~ Crossing out and eliminating any one power also eliminates the final

power listed which refers to all other matters.'" Thus, in New York, if no powers are

eliminated, then all powers listed on the statutory form are granted. This method of

designating powers may be confusing to the average person who may assume with a

quick review that s h e should simply initial the boxes which correlate to powers she

wishes to convey.

California uses a different method, that of initialing one line if all the powers

listed on the statutory form are desired. If all listed powers are not desired, the

principal initials the line in front of the power(s) she is granting. To withhold a

power, the California principal may, but does not need to, cross out the undesired

power.lJS

Wisconsin uses a third approach which requires the principal to initial the line in

front of each power s h e wishes to grant. To withhold a power, the principal may do

nothing or may cross out each power withheld. Wisconsin requires the principal to

give separate attention to each power listed $on the statutory form, and this approach

may result in greater consideration by the principal of the breadth of authority being

granted to the agent.146 This method requires at least minimal participation in the

choices rather than passive acceptance of what is on the form. One disadvantage to

this method is that if a principal inadvertently fails to initial a desired power, there will

be no conveyance of authority, because there i~ no presumption that a power'was

meant to be chosen. However, this is more sakisfactory than having authority granted

unintentionally by some inadvertent failure on the part of the principal.


RECORDATION OF ALL DURABLE POWERS OF A'ITORNEY SHOULD BE REQUIRED TO PRO'IECI' PRINCIPALS AND ENABLE THJRD PARTIES TO ASCERTAIN THE VALIDlTY OF A DURABLE POWER OF AIITORNEX.

Recordation of a durable power of attorney in a convenient location, such as a

I county clerk's office, would be an additional formality that may put a potentially

dishonest agent on notice that hisher acts are subject to public scrutiny. Additionally, I

this measure would be sensible for the trustwqrthy attorney-in-fact, as well, because I

recording enables the attorney-in-fact to provi d e certified copies to banks and other

institutions in order to transact the principal's business. From a single recorded copy,

the clerk can provide multiple certified copies, and a record could be kept by the

recording office of the number of certified copies obtained. Furthermore, tracking the

distribution of copies would be simplified if it were necessary or desirable to revoke the

I- durable power of attorney since the principal or agent, could determine how many

copies had been certified. Requiring third parties to accept only1 certified copies and

requiring the agent to be able to account for distribution of ce ed copies might T further thwart durable power of attorney abuse. Finally, banks p/nd other financial

institutions often prefer a certified copy of a durable power of attorney, because it

provides added assurance of validity.

Sixty percent of survey respondents were of the opinion that mandating

recording requirements for all durable powers of attorney would be helpful. Most state

statutes are silent on the subject of recordation, however many durable powers of

attorney are recorded.'"

5 9

Some states such as Mississippi, Pennsylvania and South Dakota have permissive

recording requirement^.'^^ In New York, as in other states whose statutes are silent as

to recording, a durable power of attorney may be recorded with the register of deeds

for the purpose of obtaining an unlimited supply of certified copies of the document.149

North Carolina requires recordation if the power of attorney is to survive

incapacity and thus be d~rable.'~" Texas requires that a durable power of attorney

which grants powers over real property be recorded in the county in which the

property is 10cated.'~' South Carolina requires that the instrument be "probated," i.e.,

proved by an affidavit of the witnesses, and "recorded in the same manner as a deed in

the county where the principal resides at the time the instrument is recorded."lS2 South

Carolina does not require recordation if the power of attorney authority relates solely

I to the person of the principal. However, if the instrument is to be used for property

+management, it must be recorded to survive the ioss of capacity of the principal. it

1 can be recorded before or after the onset of the principal's physical disability or mental

, Statutes should be clear as to where the document must be recorded. The

North Carolina statute requires the attorney-in-fact to file the document in the office of

the register of deeds of the county designated in the durable power of attorney, or if

no county is designated, in the county where the principal has a legal residence or in a

county where the principal owns property or where one or more of the attorneys-in-

fact resides.lu

Recording durable powers of attorney would allow third parties to ascertain the

60

validity of the document with a simple search since revocation would also need to be

recorded. One commentator believes recording provides "an easy, relatively inexpensive

method of confirming validity of durable powers of attorney: a quick check of the

county courthouse But, as another commentator notes, "[while] registration

with the court serves as confirmation to third parties that the attorney-in-fact is

authorized to act, . . . registration is only a rubber stamp rather than real protection if

investigatory powers are never used."ls6 While this is true, mandatory recordation,

when combined with formal execution requirements, may serve to help safeguard that a

principal is not coerced or tricked into signing a durable power of attorney without the

knowledge of another person.

There is some concern that recordation may raise privacy issues. In order to

preserve the privacy of a principal who does not wish public disclosure of hisfher

financial affairs when recording a narrowly-drafted durable power of attorney, it is

possible to record a standard form document having broad language. In addition to

the recorded durable power of attorney document, the parties can then have a

supplemental agreement giving the details under which the agent is to exercise the

powers given by the recorded document. This detailed power of attorney agreement

can remain confidential between the parties and not subject to public scrutiny.lS7

Recording offices could be required to maintain separate registries for

recordation (and revocation) of durable power of attorney documents. Separate

registries including separate principal and agent indexes would assist a third party in

determining the validity of a durable power of attorney. To that end, any revocation

61

requirement should include filing a written notice of revocation in the recording office,

and additionally an agent or an estate administrator should be required to file a notice

of revocation due to the death of the principal. All these procedures would enhance

third-party confidence in the power of attorney authority.

In summary, recording a durable power of attorney puts the attorney-in-fact on

notice that as agent for the principal his~her acts are subject to public scrutiny, enables

the agent to obtain unlimited certified copies of the document, and provides third

parties the opportunity to authenticate the doc 1 ment.


DURABLE POWER OF ATIORNEY STATUTES S H O W PROVIDE CLEARLY- SPECIFIED PROCEDURES FOR REVOCATION.

i

Although a competent principal can revoke a durable power of attorney at any

time,'" most'state statutes are silent on the subject, depriving the principal of a clearly-

articulated process in the event they desire to terminate the power of attorney.lsg

Principals, attorneys-in-fact, and third parties honoring durable powers of attorney

should have revocation procedures on which tqey can rely. A lack of articulated

revocation procedures may enable a dishonest agent to continue acting under the guise

of a power of attorney after the principal had intended to revoke the authority.

The North Carolina statute enunciates clear revocation pro~edures.'~" The statute

differentiates between a recorded or non-recorded durable power of attorney and states I

what is to be done in each case.

In the case of a recorded durable power, revocation is by I

* the death of the principal, or I I

* recording the revocation which has been and acknowledged by a competent

* recording the revocation executed by a person or corporation given the power to revoke; and

* proof of service that the revocation has been served on the attorney-in-fact in the manner of a summons.161

In the case of a non-recorded durable power, revocation is by

* the death of the principal; or

* any method provided in the power of attorney; or

* being burned, tom, canceled, obliterated, or destroyed with the intent and purpose of revoking by a competent principal or another in his or her presence and at his direction; or

* a written revocation executed and acknowledged by a competent principal and sent to the attorney-in- fact by registered mail.'"

In Minnesota, the durable power of attorney may only be revoked by a written

instrument signed by the principal. Where the revocation instrument is signed by

another on behalf of a principal unable to sign, the revocation must be acknowledged

before a notary public.la The Minnesota statute further states that "revocation of an

executed power of attorney is not effective as to any party unless that party has actual

notice of the re~ocation."'~~ In many states the power is not revoked until the agent or

third parties relying on the document receive actual notice of the principal's death.16' 1

- - . 'l'hus generally, durable power ox attorney statutes snoula clearly articulate tne

state's revocation requirements, and the procedure should also be communicated to the

~ principal and attorney-in-fact by appearing on the face of statutory short forms or other

I pre-printed forms. "[Rlevocation by the [~ompetent'~~] principal should be in writing

and be delivered to the agent. Copies of the notice of revocation should be delivered

to all financial institutions and other third parties with whom the agent had dealings on

behalf of the principal. The principal should attempt to account for all executed and

photographic copies of the Durable Power of Attorney. Finally, if the Durable Power

of Attorney has been recorded with any register of deeds, the notice of revocation

should also be drafted in recordable form and recorded in the appropriate counties!'167

Legislative Opti011 #6

PERMIT PARTIES TO PEXlTION A OURT TO TERMINAATE THE DURABLE POWER OF AITORNEY IF THE AGENT IS ACTING IMPROPERLY-

One way to informally monitor an attorney-in-fact is to give certain persons the

authority to petition a court for the purpose of terminating the durable power of

attorney. Allowing this form of third party intervention would provide a simple and

inexpensive check on the actions of an attorney-in-fact. 1

Four states recently enacted legislation providing for this safeguard. California,

Missouri and New Hampshire statutes now provide a list of interested persons who

may ask a court to, among other things: rule on the legality of the attorney-in-fact's

actions; compel reports; or terminate the durable power of attorney because of

abuse.168 In Illinois, an interested person may petition a court to appoint a guardian to

exercise the powers granted under the durable power of attorney if the court £inds that:

(1) the principal is not able to control or revoke the agency; and (2) the attorney-in-

fact's actions deviate from the durable power of attorney and threatens, or has caused,

substantial harm to the principal.'*

These states have identified a way in "which the activities of the attorney-in-fact

can be monitored and the estate of the principal can be safeguarded after the onset of

incompetency."'70

The only problem with these options is that they involve court intervention and,

as stated earlier, the durable power of attorney was designed as a simple way to avoid

complex legal proceeding^.'^' However, these options only provide for court

66

intervention if the durable power of attorney is failing to provide the principal with

helpful financial assistance; if there is no problem, there is no court intervention.


A'ITORNEYS-IN-FACT SHOULD BE HEED TO STATUTORY FIDUCIARY STANDARDS SIMILAR TO OTHER STATUTORY FIDUCIARIES SUCH AS TRUSTEES AND EXECUTORS, AND THEREEORE AS RECOGNIZED STATUTORY FIDUCIARES, AGENTS SHOULD BE ENlTlED TO A STATUTORY COMMISSION IF THE DURABLE3 POWER OF A W R N E Y INSTRUMENT FAILS TO ADDRESS COMPENSATION.

While some attorneys-in-fact are professionals who are compensated for work

done on behalf of a principal, commonly a family member or close friend is appointed

as the agent. In most situations, this appoint ent is logical and efficient. However, 4 the appointed family member or friend may spend considerable time, in fact much

more time than was anticipated when the individual agreed to undertake the role as

agent. This volunteer who ends up doing a great deal of work on behalf of the

principal may feel imposed upon if not paid and not a beneficiary of the estate. This

could potentially lead to the agent "helping herself/himselfl to the principal's assets and

abusing the fiduciary duty accompanying the position & attorney-in-fact.

The fiduciary relationship of the attorney-in-fact has been /determined in most

states through common law decisions. "An attorney-in-fact is an agent of the principal, i and since an agent is a fiduciary, a relationship of trust and coddence exists between

himher and the principal. Accordingly the agent must act in the utmost good faith

and undivided loyalty toward the principal, and must act in accordance with the highest

principles of morality, fidelity, loyalty, and fair dealing."ln In New York, however, "the

precise fiduciary standard for an attorney-in-fact under a durable power of attorney for

property has not been arti~ulated."'~ This is true for most states where the fiduciary

relationship between principal and agent is found in the common law but is not fixed

by statute. Case law further amplifies the duty of care instituted by a fiduciary

relationship: "It is an elementary principle that an agent cannot take upon himself

incompatible duties, and characters, or act in a transaction where he has an adverse

interest. . .. 11174

While New York's durable power of attorney statute specifies that the attorney-

in-fact may be required to provide an accounting to the principal's conservator or

committee if one is appointed,175 there is no s)atutory duty to provide an accounting to

the principal or a third party appointed by the principal. Instead, the duty to provide

an accounting to the principal has been found by the courts.'76

The South Carolina statute provides that "[tlhe agent shall have a fiduciary

relationship with the principal and shall be accountable and responsible as a

fid~ciary."'~

Indiana requires the attorney-in-fact to act in a fiduciary wpacity, to use due I

care when conducting business for the principal, and to keep co plete records of all

transactions completed on behalf of the principal.178 7 S p e c w g the fiduciary relationship and the duty of care in the statute, puts the

agent on notice of:

* the need to act in good faith and avoid selfdealing;

* the need to use due care in acting for the principal's benefit; and

* the need to keep complete records of all transactions conducted on behalf of the principal.

The responsibilities of the attorney-in-fact must be made clear. This is

particularly true in the case of an unsophisticated agent who may have no prior

experience in acting in such a position.

Although executors, trustees, and other types of fiduciaries may be entitled to

statutory compensation, most state statutes do not provide for compensation to an

attorney-in-fact. The parties may intend that the attorney-in-fact will serve with or

without compensation and could make this clear in the document.'79 However, if the

parties have not stated their wishes as to compensation and a principal loses capacity

without addressing the issue of compensation, statutorily-determined compensation rates

would eliminate conflict and indecision. The statutory compensation could always be

waived in the durable power of attorney document prior to the principal's incapacity.

A few states do authorize compensation in their durable power of attorney

statute: North Carolina provides that if the durable power of attorney instrument is

silent with respect to the amount of commission the attorney-in-fact is entitled to

receive, or the basis for calculating the commission, the clerk of the superior court has

the discretion to determine the amount of commission after the principal has lost

capacity to act.''" The compensation is based on a percentage of the value of each

transaction conducted on behalf of the principal and is different from the statutory

commission given to trustees.l8'

Indiana and Missouri statutes declare that unless the durable power of attorney

instrument states otherwise, the attorney-in-fact is entitled to reasonable compensation

as well as reimbursement for any reasonable expenses advanced on behalf of the

70

principal. In Indiana, the attorney-in-fact must submit a written statement to the

principal within one year of services rendered in order to be paid.'"

A professional attorney-in-fact should be able to conduct the principal's affairs

under the presumption that unless the fee is waived or otherwise agreed upon, she will

be compensated for such work. If the agent is a professional such as an attorney-at-

law or an accountant, there should be an agreement as to how the time spent will be

compensated, such as whether it falls under the normal fee arrangement with the

client. If there is no agreement in the power of attorney or otherwise, a statutorily-

determined fee would minimize disputes. Having the provision for statutory

compensation may deter abuse in the situation where the agent is claiming payment,

and it is impossible to prove whether the principal had so instructed the agent.

Thus, if a durable power of attorney does not address the issue of compensation

for the attorney-in-fact, statutorily-determined compensation should be available if the

attorney-in-fact takes action on behalf of the principal. A principal and attorney-in-

fact should always be able to waive any fee, such as in the case of a family member

serving gratuitously. However, an attorney-in-fact could transact considerable business

on behalf of the principal and should be entitled to a set amount, without dispute, if

no agreement has been made while the principal has the capacity to do so.'=


REQUIRE NOTIFICATION TO THE PRINCIPAL (OR A DESIGNATED THIRD PARTY) WHENEVER THE DURABLE POWER OF ATM)RNEY IS USED BY THE A'ITORMEY-IN-FAm FOR A TRANSACTION OVER AN AMOUNT SPECIFIED BY THE PRINCIPAL IN THE DOCUMENT.

Of the 270 victims of durable power of attorney abuse documented in the GLC

survey, 57% were competent when the abuse occurred. Perhaps if the principals had

simply been aware of the transactions conducted on their behalf, they might have been

able to prevent the abuse. i One way of bringing potential abuse to the competent principal's attention is to

require that the principal be notified whenever the attorney-in-fact takes any action on

hisher behalf. However, such a requirement might defeat the principal's intended

purpose--delegation of authority--by involving hidher in many decisions she did not

want to handle.

Rather than notifying the principal about every transaction, another option is to

require notification of the principal whenever the attorney-in-faq undertakes any

signifiant transaction. Half of the GLC survey respondents beli ved that notification in I those circumstances would help curb durable power of attorney abuse.184 The primary

problem with this requirement relates to the subjective determination that would have

to be made prior to notification: is this particular transaction significant? This problem

can be eliminated, though, if each principal specifies a monetary amount, when

executing the durable power of attorney, that would automatically trigger notification.

Notification can take place either before or after the transaction. Notifying the

72

principal before the transaction could help prevent abuse before it even occurs.

However, such notification would delay transactions and perhaps defeat the usefulness

i of the tool. Notifymg the principal after the transaction would avoid delays and could

still help uncover abuse that had just taken place.''' This would help the principal to

seek a quick resolution of a questionable transaction, and would serve to prevent future

abuse.

As a final option, the last two methods lcould be combined in a two-tier

notification process. For example, for transachons between $1000 and $5000

notification could take place after the transaction, but for transactions over $5000

notification would have to be given prior the transaction (once again the principal

would provide the specific monetary figures when drafting the durable power of

attorney).


STATES S H O W CONSIDER REVISING CRIMINAL STATUTES TO PROSCRIBE ENHANCED SENTENCES FOR THOSE WHO COMMJT CRlMES SUCH AS DURABLE POWER OF ATTORNEY ABUSE AGAINST ELDERLY AND INCAPACITATED INDIVIDUALS.

Enhancement statutes consider normal sentencing and increase penalties for

those convicted of perpetrating crimes against vulnerable individuals. Enhanced

sentencing statutes may be helpful to deter those agents who would abuse the fiduciary 1

relationship where the principal is elderly or incapacitated and defenseless against such

Sixty-nine percent of GLC survey respondents believe that revising criminal

statutes to impose harsher penalties would be a helpful solution to combat financial

abuse of vulnerable individuals such as the elderly and incapacitated.

In 1989, Oklahoma enacted such a statute. The "Elderly and Incapacitated

Victim's Protection Program"lg7 provides enhanced sentencing for certain acts against

elderly or incapacitated persons.188 The statute defines "elderly" as persons sixty-two

years of age or older, and "incapacitated" as individuals who are disabled by mental or

physical illness or disability and as such are lacking the ability to personally protect

themselves or their property.'* The statute applies to acts of grand larceny,

embezzlement, fraud, or obtaining or attempting to obtain property by trick or

deception.lgO

For conviction of a first offense against an elderly or incapacitated individual,

the act provides for a mandatory thirty-day minimum period of confinement, restitution

to the victim for out-of-pocket expenses for loss or damage to property, and mandatory

community service. The court has the discretion to impose an additional fine or

penalty,191 and the victim retains the right to recover damages through a separate civil

suit since no "consequential" or punitive damages are recoverable under this ~ r0g ram. l~~

If the perpetrator is convicted of further offenses against an elderly or incapacitated

person, penalties are enhanced for the second and subsequent convictions. For

example, for a second conviction that would normally be punishable for a term

exceeding five years, the imprisonment shall be for a minimum of ten years, and a

third felony offense conviction would invoke a minimum twenty-year prison term.'-

While not specifically addressing durable power of attorney abuse or financial

exploitation, other states also enhance sentences for crimes against the elderly. Most

often these enhanced penalties embrace crimes committed by strangers and are written

to include crimes of physical violence.'% States such as Florida and Arizona have

specific statutes applying to financial abuse of elderly and incapacitated persons.

Florida and Arizona handle financial abuse of older citizens through Adult Protective

Services programs.'95 The Florida statute defines wrongdoing by an attorney-in-fact as

exploitation which "means but is not limited to, the improper or illegal use or

management of an aged person's or disabled adult's funds, assets, or property or the

use of an aged person's or disabled adult's power of attorney or guardianship for

another's or one's own profit or advantage."'% Arizona law defines exploitation as "the

illegal or improper use of an incapacitated or invulnerable adult or his resources for

another's profit or ad~antage."'!'~

75

Enhanced penalty statutes that specify financial abuse of an elderly or

incapacitated person may serve to deter potential wrongdoers from exploiting

vulnerable individuals. A shortcoming of such a statute is that not all persons sixty-

two years of age or even much older are "vulnerable" or "defenseless" while some

persons of a younger age may be unable to protect themselves against an agent who

would misuse the power of attorney. Thus defining who is "elderly" and who is I

"incapacitated" is problematic. A statute mighf limit the protected elderly population to

the "frail elderly" which would not eliminate d d finitional problems but would narrow the

elderly population to which enhanced sentencing would apply. A younger,

incapacitated person would still be included and protected, but an older, able person

would not be presumed to need protection.

A potential problem with specific criminal statutes such as this is that the

perpetrator could claim ignorance of the fact that the victim was a member of a

protected population. Presumably an attorney-in-fact would know the age of the

principal and such a defense would be without merit. However, /even if this defense

were successful, conviction and sentencing could still be carried ut without the

enhanced sentence.

4 Statutes to enhance sentences could be modeled after the Oklahoma statutes

which are specifically aimed at curbing crimes against the elderly and incapacitated.

The existence of enhanced laws sends a stronger message to potential abusers of the

elderly or incapacitated than merely prosecuting under general statutes.


CREATE A PUBLIC R E G m Y LISTING INDIVIDUAIS WHO HAVE BEEN ONVI- OF DURABLE POWER OF AlTORNEY ABUSE

A public central registry of convicted durable power of attorney abusers could

help prevent future abuse by repeat offenders. Any individual who has misused the

assets of a principal and was subsequently convicted for the wrongdoing could be

entered into either a nationwide or statewide database.'* A principal could then avoid

potential abuse by checking with the registry t+ ascertain whether hisher attorney-in-

fact had abused this type of relationship in the past.

Florida and Arizona have central registries that provide information on

individuals who have had complaints filed against them for abuse of an aged or

incapacitated person. Arizona makes available to the general public the "dates of the

conduct set forth in the complaint, the nature of the complaint and the disposition of

the complaint or indi~tment."'~~ Florida's central registry is administered through the I

state's Department of Health and Rehabilitative S e r v i c c ~ . ~ Thd department is

required to 1

maintain a central abuse registry and tracking system . . . [to] receive all reports . . . in writing or through a single statewide toll-free telephone number which any person may use to report known or suspected abuse, neglect, or exploitation of an aged person or disabled adult at any hour of the day or night, any day of the week.a01

The utility and practicality of a central registry depends primarily upon which

individuals are included in the database. With respect to a durable power of attorney

registry, the database could include: (1) all those who have served as an attorney-in-

fact; (2) the attorneys-in-fact who have had a civiVcrimina1 complaint filed against them

for durable power of attorney abuse; or (3) only those attorneys-in-fact who have been

convicted for durable power of attorney abuse.

As for the first option, a registry listing every attorney-in-fact would simply be

too costly to create, and supplement, and would not provide any information that could

help a principal determine whether s/he has chosen a trustworthy agent. The GLC

survey respondents seem to agree with these assessments: only 31% of the "

respondents believed such a registry would be helpful, while 59% felt it was impractical.

The second option (listing attorneys-in-fact who have had a civiVcrimina1

complaint filed against them for durable power of attorney abuse) wot~ld be less costly

and more informative. There would be fewer names to enter into the registry and it

would inform principals that the agent they have chosen may have abused a position of

trust in the past. However, the problem with this option is that groundless complaints

are often filed. A person may, therefore, be placed on a list that negatively affects

hisher reputation when there is no proof of any wrongdoing on hisher part. It was

this concern that recently motivated Arizona to revamp its central registry to contain

only the names of individuals who have been convicted of wrongdoing.* Yet,

recording only convictions has its shortcomings as well. As the GLC survey findings

indicate, very few cases of durable power of attorney abuse result in a con~ic t ion .~

Furthermore, any registry of durable power of attorney abusers is only helpful if

there are repeat offenders. The GLC survey fmdings revealed that the vast majority of

durable power of attorney abusers are family membersYm rather than strangers who

78

repeatedly prey upon principals. Additionally, it would be unlikely for a principal who

is selecting a family member as attorney-in-fact to be unaware of a close relative's

criminal conviction or to check a registry before executing a durable power of attorney.

Nevertheless, because a central registry listing only those convicted of durable

power of attorney abuse would not be costly to maintain and would provide extremely

I valuable information to unsuspecting principals, other states might consider following

Arizona's lead to establish such a registry.


REQUIRE THAT ATTORNEYS-IN-FACI' POST A SURETY BOND.

A surety bond is a document that requires a surety (i.e., an insurance company)

to reimburse a principal in the event a third party defaults on an obligation owed to

the principal.20s The purchase of a bond is required in many relationships to protect

principals from abusive or neglectful agents.= However, an attorney-in-fact is not

required, in any state, to insure a principal's a sets with a surety bond. ~ e ~ u ' i r i n ~ the

attorney-in-fact to obtain a bond may not det I durable power of attorney abuse, but it

would guarantee that the principal would at least be reimbursed in the event abuse

occurred.

Considering that 67% of the durable power of attorney abusers in the GLC

survey misappropriated at least half of their principal's assets, it may be prudent to

require the posting of a surety bond to insure those assets. However, mandating the

purchase of a bond for everyone could force many principals who do not need a bond

to insure themselves unne~essarily.~~~ Furthermore, many princi of modest means

who could not afford a bond may be deterred from executing a power of

attorney that would otherwise be in their best interest.

Most of the additional costs associated with durable power of attorney

monitoring (e.g., purchasing a bond, preparing an annual accounting) would have to be

met by the principal. It is simply unreasonable to expect that an uncompensated agent

would meet these costs with hisher own money when she has already dedicated hisher

time gratuitously.

80

Reflecting all of these concerns, 57% of the GLC respondents indicated that

requiring an attorney-in-fact to post a bond kould be impractical. Ultimately, while a

reform of this kind would protect some, it may burden many more unnecessarily.

Legislative Option 4412

REQUIRE THAT A THIRD PARTY BE GIVEN THE POWER TO REVOKE THE DURABLE POWER OF A'ITORNEY IN THE EVENT THE PRINCIPAL IS UNABLE TO DO SO.

Any individual who executes a durable power of attorney has a legal right to

revoke the device at will so long as she remains com~etent.~" However, while "the

presumably competent person [has the right to] terminate a power of attorney at any

time, [she] may lack the emotional willingness or physical capacity to effectuate that

legal right!1209 Furthermore, once the principal is adjudged legally incompetent, she

loses the right of revo~ation.~'~ "After the onset of incapacity . . . his/her contractual

disability would prevent him/her from either entering and [sic] voiding contracts."211

As a result, allowing a third party to revoke the durable power of attorney in

the event the principal cannot do so could prove desirable. The authority would allow

for easy termination of a fiduciary relationship that might otherwise continue

inadvisably.

However, this authorization would not be without problems. First, adjudging

when it is no longer wise to continue a fiduciary relationship is often a difficult

determination. A nervous or misinformed third party may revoke the durable power of

attorney prematurely.212 Second, the prevalence of durable power of attorney abuse

suggests that many principals have a difficult time finding one reliable individual to

assist them. Consequently, it may be unrealistic to expect principals to find a second

trustworthy individual. Finally, the power of revocation is absolute; no reason or

justification has to be offered to revoke a durable power of attorney. As such, if a

82

third party was untrustworthy, or had self-serving interests, s/he could feasibly revoke a

durable power of attorney to satisfy hisher own interests.

Reflecting these concerns, only 36% of the GLC survey respondents believed

that a requirement granting a third party the power of revocation would be helpful,

whereas 50% felt that such a requirement would be impractical.


REQUIRE PRINCIPALS TO NAME MORE THAN ONE A'ITORNEY-IN-FACT.

While most states allow a principal to appoint two or more attorneys-in-fact, i

none require it.213 A requirement of this kind could help curb durable power of

attorney abuse by placing an immediate check on any action taken. While it is true

that two persons can be just as unscrupulous as one, at least some abuse may be

1

revealed or deterred if there is more than one agent.

The multiple agents could act either joi b tly or severally. Jointly means that the

agents would have to act together, whereas severally indicates that the agents could act

independently of each other. There are problems associated with both of these

approaches. If the agents are required to act jointly, or together, disputes could arise

as to what actions are appropriate or desirable. Additionally, a lack of proximity or

differing schedules could prevent the agents from meeting frequently enough to timely

transact necessary business. Finally, "if two agents are named to ,act 'jointly,' when one

dies, the survivor cannot act.'"" Allowing agents to act several1 , or independently, is

problematic in that it could lead to "mutually contradictory actio s'"lS if the agents do I not keep in close communication. For example, "a tract of the principal's real property

might be conveyed to one purchaser by one of [the] agents and to a second purchaser

by another agent!""

Seventy-eight percent of the GLC survey respondents believed that requiring the

appointment of multiple agents was impractical. Even though the appointment of a

second agent could help decrease durable power of attorney abuse, many opined that

84

the presence of the second agent would impact too negatively on the utility of durable

powers of attorney.


REQUIRE THE ATTORNEY-IN-FAm TO PROVIDE AN ANNUAL ACCOUNTJNG TO A COURT OF LAW.

Requiring an attorney-in-fact to provide an account of all the transactions s h e

has made would help reveal abusive acts and would help deter further wrongdoing.n7

In terms of uncovering past abuse, there is perhaps no surer way to expose improper

behavior than by periodically reviewing an agent's transactions and identifying the

amount of assets the principal still has. In te of deterring future abuse, an agent P who knows hisher actions will be thoroughly reviewed will be less likely to abuse

hisher authority because of the likelihood that hisher misconduct will be discovered.

However, an annual accounting can only uncover abuse, or serve to deter abuse,

if it is diligently reviewed. For example, although guardians are typically "answerable to

a court and must file accountings at least annually,'Ins the effectiveness of guardianship

monitoring has been questioned due to inadequate review of accounting^?'^

Highlighting the problem, one GLC survey respondent stated tha "mandating t accounting solves nothing if the courts are too overwhelmed to d anything!'z20 Steps J are being taken, though, to improve guardianship monitoring an a system for durable

power of attorney monitoring could incorporate these improvements."'

There is the additional issue of the time and costs involved with preparation of

an accounting. Over the course of a year an agent may make numerous transactions

on behalf of the principal. Reviewing all the documents (e.g., receipts, deposit slips,

bank statements) and preparing a detailed and balanced report could be a very lengthy

process. While an uncompensated attorney-in-fact may agree to keep records of

hisher actions," it is unlikely that she would agree to serve as agent if required to

take the time to prepare the report as well.= As such, a paid professional will most i

likely be needed to prepare the accounting. This creates additional cost. that, like the

purchase of a surety bond, could present a burden to principals and might deter some

from using a durable power of attorney.

Fifty-two percent of the GLC survey respondents believed that requiring the I

attorney-in-fact to file an annual accounting wiLh a court would be helpful, whereas

40% felt that such a requirement would be impractical. It is yet another change that

would bring benefits, but not without costs.


REQUIRE MANDATORY REPORTJNG BY CERTAIN THIRD PARTIES OF KNOWN OR SUSPECIED DURABLE POWER OF ATTORNEY ABUSE

Mandatory reporting for financial abuse of the elderly is controversial, and many

elder law authorities oppose the practice because of its impact on personal autonomy.

However, requiring mandatory reporting of durable power of attorney abuse would help

law enforcement authorities identify agents who are violating the law. Such a statutory

obligation would place the burden to divulge knowledge or suspicion of abuse on those

in a position to detect misuse of assets or exploitation by an attorney-in-fact. The

statute should spec* certain third parties such as bank, savings and loan, or credit

union employees and officers, attorneys, accountants, or tax preparers, because these

persons and others in similar circumstances are in a position to observe financial

transactions conducted by agenl pursuant to a power of attorney.

The goal of a reporting statute is to increase the detection of fiduciary abuse.

Detection of abuse is a problem for both competent and incapacitated principals,

because an attorney-in-fact may be conducting the principal's business affairs

independent of any oversight. Mandating that all persons report suspected abuse

would result in an unmanageable requirement that would be impossible to enforce.

Therefore, only specified third parties should be required to report their knowledge or

suspicion to a state or local agency empowered to investigate the alleged abuse.

Arizona and Florida laws require such mandatory reporting, and both states

maintain a central registry to report and track proven or suspected abuse. Florida

mandates bank, savings and loan, and credit union officers, trustees, employees or

anyone else with a reasonable basis to suspect possible abuse to report knowledge or

i suspicion of such exploitation to the central abuse registry on a statewide toll-free

telephone n ~ r n b e r . ~ Reporting to the central abuse registry triggers an immediate

investigation into the suspected abuse." A third degree felony conviction results if the

abuse is proved.=

In Arizona, the list of those mandated to report includes attorneys, accountants,

trustees, guardians, conservators, or any other person who has responsibility for

preparing tax records or for any other action concerning the use or preservation of an

incapacitated or vulnerable adult's propertym The reporting individual need only have

a reasonable basis of suspicion of wrongdoing and must report such suspicions to a

peace officer, a protective services worker, or to the public fiduciary of the county

where the abused person resides.= A procedure for investigation is then i n s t i t ~ t e d . ~

When reporting is required, and not discretionary or optianal, the specified I

individual should be liable for damages if they failed to report a use which was

uncovered at a later date. However, the act of reporting should 1 not subject the

individual complying with the reporting requirement to liability if the suspicion of abuse

proves to be unfounded.

Conversely, mandatory reporting should never be an excuse for third parties to

refuse to accept an agent's authority and should be confined to situations where abuse

is clearly present or is strongly suspected. While it would be difficult to define all

situations where abuse should be suspected, guidelines such as those used in other

reporting statutes could be followed. Furthermore, a mandatory reporting statute must

be supported by a state or local agency with adequate investigational capabilities and a

commitment to prosecute if warranted. A check of a suspicious attorney-in-fact's

actions and verification that the attorney-in-fact is indeed acting in concert with the

principal's wishes should be a minimal expectation.

Finally, it is noted that in addition to any practical problems associated with

mandatory reporting, many persons believe that it is improper to subject a pdrson to

liability based on failure to act. However, even though controversial, mandatory

reporting is an example of a reform that potentially could greatly aid in detecting

durable power of attorney abuse.

VIII. CONCLUSION

There are a number of legislative solutions that could serve to curb

opportunities for durable power of attorney abuse. Because over-regulation may inhibit

the principal's execution of a durable power of attorney and similarly restrain a

conscientious agent from serving as attorney-in-fact, legislation that would deter abuse

without placing great burdens and costs on the principal, trustworthy attorneys-in-fact,

and third parties is desirable. Regulation of some sort is warranted, however, because

of the extent to which durable power of attorney abuse is occurring, according to the

findings of the GLC survey.

ENDNOTES

1. The durable power of attorney may also be used to delegate the authority to make health care decisions. This report, however, will focus solely on the financial aspect of the durable power of attorney. For a discussion of health care durable powers of attorney see Elizabeth G. Patterson, Planning for health care using living wills and durable powers of attorney: A Guide for the South Carolina attorney, 42 S.C. L REV. 525, 551-563 (1991); James N. Zartman, lUinois Power of Attorney Act, S. ILL. U. LJ. 1, 40-49 (1988); Note, Jeffrey Kolb, Indiana Power of Attorney Act, 25 IND. L. REV. 1345, 1360-70 (1992).

2. Kolb, supm note 1, at 1345 ("From its umble common-law origins, the power of attorney is now a preeminent estate pl tool rivaling the will as a necessary consideration.").

3. William H. Thedinga, Wisconsin's New Statutory Power of Attorney, 65 WIS. LAW. 19, 19 (1992) ("Durable powers of attorney are widely used today and are an important part of most estate plans.").

4. See Alison Patrucco Barnes, Beyond Guardianship Reform: A Reevaluation of Autonomy and Beneficnce for a System of Principled Deciston-Making In Long Term Care, 41 EMORY LJ. 636, 749 (1992); L Stuart Ditzen, Using Power-of-Amey as Power to Steal @m the EIderZy, PHILADELPHIA INQUIRER, June 5, 1992, at Al; Maitland Zane, 93-Year-Old's W t e e s Fired; Husbad 48, Accountant Accused of Fleecing Her of Millions, S.F. CHRON., June 25, 1991, at A14.

5. The survey was sent to elder law practitioners and sbial senice providers throughout the country and to district attorneys and surrogdte judges in New York. Additionally, the survey was distributed in two newsletters ELDER LAW FORUM of AARP's Legal Counsel for the Elderly and THE ELDER W A'ITORNEY of the L NYSBA's Elder Law Section. The study pool, while not scientific, was designed to elicit a broad array of responses and opinions. The results of the survey are documented in section V of this report.

6. Marshall B. Kapp, Who's The Parent Here? 7he Family's Impact On 7he Autonomy qf Older Persons, 41 EMORY LJ. 773, 793 (1992); see also Lori A. Stiegel, Sally Balch Hurme, and Michael Stone, Durable Powers of Attorney: An AnaZysis of State Statutes, CLEARINGHOUSE REV. 690, 695 (October 1991) ("Bar association committees and other advocacy groups must balance the need for ease in obtaining DPA's with the need to protect vulnerable adults who have lost capacity and have become reliant upon the actions of a designated agent.").

7. Power of attorney is defined in Black's Law Dictionary as "[an] instrument in writing whereby one person, as principal, appoints another as his agent and confers authority to perform certain specified' acts or kinds of acts on behalf of principal!' BLACK'S LAW DICTIONARY 1171 (6th ed. 1990).

i

8. A durable power of attorney as defined in Black's Law Dictionary, "[elxists when [a] person executes a power of attorney which will become or remain effective in the event he or she should later become disabled." BLACK'S LAW D I ~ O N A R Y 1171-72 (6th ed. 1990).

9. Maj. Michael N. Schmitt and Capt. Steven A. Hatfield, The Durable Power of Attorney.- Applications and Limitations, 132 MIL. L REV. 203, 203 n.2 (1991).

10. Stiegel et al., supra note 6, at 691. I

I 11. A. L. Moses and Adele J. Pope, Estate Planning, Disability, and the Durable Power

of Attorney, 30 S.C. L REV. 511, 518-19 (1979).

12. Stiegel et al., supra note 6, at 691.

I 13. Id.

I 14. William M. McGovern, Jr., lhu~, Cwtodianrhips, and Durable Powers of Attorney, 27 REAL PROP., PROB. & TR. J. 1, 18-19 (1992).

I

15. See UNIF. PROBATE CODE 5 5-501, 8 U.L.A. 295 (Supp. 1993).

16. Competency in this context means mental competency: ability to understand the nature and effect of the act in which a person is and the business he or she is transacting." BLACK'S LAW DICI'IONARY

17. Stiegel et al., supra note 6, at 691.

18. See, e.g., Kolb, supra note 1, at 1350-51.

19. Moses and Pope, supm note 11, at 526. I

21. Schmitt and Hatfield, supra note 9, at 210. I 22. Stiegel et al., supra note 6, at 694. I 23. John E. Bos, The Durable Power of Attorney, MICH. BJ. 690, 691 (July 1985).

Lawrence Friedman and Mark Savage, Taking Care: The Law of Conservatorship in California, 61 S. CAL. L. REV. 273, 287 (1988).

McGovern, supra note 14, at 24.

Schrnitt and Hatfield, supra note 9, at 207.

Moses and Pope, supra note 11, at 514; Bos, supra note 23, at 691.

Kolb, supra note 1, at 1347.

Id. at 1347-48.

Robert Craig Waters, Florida Durable Power of Attontey Law: me ~ e e d for ~ e f o m , 17 FUL L REV. 519, 523 (1990); Bos, supra note 23, at 691. This was true even if the transaction was made in good faith and without knowledge, on the part of the attorney-in-fact or third party, of the principal's incompetency. Bos, supm note 23, at 691.

WNIF. PROBATE CODE 55 5-501 to -505 (prefatory note), 8 W.LA. 511-12 (1983).

See id

Kolb, supra note 1, at 1348.

FRANCIS J. COLLIN, JR. ET AL., DRAFTING THE DURABLE POWER OF AT~ORNEY: A SYSTEMS APPROACH 8 (Albert L. Moses & John J. Lombard, Jr., eds., 2d ed. 1992). For example, the requirement, in the 1964 Act, that the "power of attorney must be approved by a judge or a court of record", is something that neither the current UPC or any state requires.

See supm text accompanying notes 31 and 32.

WNIF. PROBATE CODE $5 5-501 to -505 (prefatory note).

Id. 5 5-501 ("Whenever a principal designates another his attorney-in-fact or agent by a power of attorney in writing and the writing contains words . . . showing the intent of the principal that the authority conferred shall be exercisable notwithstanding his disability, the authority of the attorney-in-fact or agent is

exercisable by him as provided in the power on behalf of the principal notwithstanding later disability or incapacity of the principal. . . .").

41. Id. 5 5-502(a).

42. Id. 5 5-502@).

43. Zartman, supra note 1, at 1.

44. UNIF. PROBATE CODE 55 5-501 to -505 (prefatory note).

45. Id

47. COLLIN ET AL., supra note 34, at 11.

48. Robert L Wol$ Elder Law Planning Tools, 65 N.Y. ST. B.J. 12, 12 (1993). One caveat to the statement in the text is that the contingency that "springs" the durable power of attorney into effect does not necessarily have to be the principal's incapacity. While this is typically the case, the principal can provide that another event will trigger the springing power.

49. See COLLIN ET AL, supm note 34, at 11.

51. Id. (commentary).

52. Note, Mark Fowler, Appointing an Agent to Make Medical ll-ealrnent Choices, 84 COLUM. L. REV. 985, 1012-13 (1984).

53. Id. at 1012 n.175. The two states were Oklahoma and Wyoming.

54. Id The states were Alaska, Arizona, Hawaii, Indiana, Iowa, Maine, Maryland, Michigan, Minnesota, Montana, Nebraska, Nevada, New Mexico, New York, North Dakota, Rhode Island, South Carolina, Texas, Utah, Vermont, Virginia, Washington, and West Virginia.

55. Id The states were Florida, Kentucky, Mississippi, Missouri, New Hampshire, New Jersey, Ohio, Oregon, and South Dakota.

56. Id The states were Alabama, Arkansas, California, Delaware, Idaho, Kansas, Massachusetts, North Carolina, Pennsylvania, and Wisconsin.

57. Id.

58., UNIF. PROBATE CODE 5 5-501.

59. UNIF. STATUTORY FORM POWER OF ATTORNEY ACT, 5 1, 8A U.L.A. 335-36 (Supp. 1993).

60. Id. (prefatory note), 8A U.L.A. 334-35.

61. Stiegel et al., supra note 6, at 690, COLLIN ET L, supra note 34, at 6.

62. David M. English, The UPC and the New Durable Powers, 27 REAL PROP., PROB. , & TR. J 333, 340 (1992). A table listing the jurisdictions which have ,adopted a

UPC modeled durable power of statute can be found in the UNIF. DURABLE POWER OF ATTORNEY U.L.A. 101 (Supp. 1993).

63. Id The 1969 version is currently in force in seven jurisdictions: Arizona, Colorado, Kentucky, Maine, Michigan, New Mexico and Utah. The 1979 version is currently in force in eleven jurisdictions: Alabama, California, Delaware, Hawaii, Idaho, Kansas, Massachusetts, Pennsylvania, Tennessee, West Virginia and Wisconsin. The 1984 version is currently in force in the District of Columbia, Nebraska, and Oklahoma. The 1987 version is currently in force in Montana and North Dakota.

64. Stiegel et al., supra note 6, at 690, COLLIN ET &, supra note 34, at 6.

65. Stiegel et al., supra note 6, at 690; Zartman, supra note 1, at 2.

66. COLLIN ET AL., supra note 34, at 90.3 ("Obviously, the durability feature of a power of attorney increases the opportunity for an unscrupulous gent to use a Durable Power of Attorney for personal advantage!'). l'

67. Kapp, supra note 6, at 792.

68. Schmitt and Hatfield, supra note 9, at 204.

69. English, supra note 62, at 346.

70. Id.

71. ALASKA STAT. 5 13.26.332 (Supp. 1993); CAL. CIV. CODE 5 2475 (Deering Supp. 1994); -LO. REV. STAT. 5 15-1-1302 (Supp. 1993); CONN. GEN. STAT. ANN. 5 1- 43(a) (West Supp. 1993); U. REV. STAT. ch. 755, para. 45/3-3 (Smith-Hurd 1992); ME. REV. STAT. ANN. tit. 18-A, 5 5-523.23 (West Supp. 1993); MINN. STAT. ANN. 5 523.23 (West Supp. 1994); MONT. CODE ANN. 5 72-31-201 (1993); NEB. REV.

STAT. 5 49-1501 (1988); N.M. STAT. ANN. 5 45-5-501(D) (Michie Supp. 1993); N.Y. GEN. OBLIG. LAW Q 5-1501 (McKinney 1989); N.C. GEN. STAT. Q 32A-1 (Supp. 1993); 20 PA. CONS. STAT. ANN. $5602(a) (1990); Durable Power of Attorney Act, ch. 49, 1993 Tex Sess. Law Serv. 103 (Vernon); WIS. STAT. ANN. Q 243.10(1)(a)

i (West Supp. 1993).

English, supra note 62, at 345.

COLLIN ET AL., supra note 34, at 17.

Thedinga, supra note 3, at 20 ('The statutory form . . . has the potential'advantage of accessibility to laypersons."); English, upra note 62, at 347 ("[Blecause the form 1 is simple and standard, individuals who ight not otherwise seek legal help may be more inclined to execute a power of attorney.").

Thedinga, supra note 3, at 20 ("[Tlhe most significant question about the form is whether it provides sufficient safeguards against abuse.").

Zartman, supra note 1, at 51.

English, supra note 62, at 352

ILL. REV. STAT. ch. 755, para. 4513-3 (Smith-Hvrd 1992).

Zartman, supra note 1, at 51.

I Kolb, supra note 1, at 1346.

McGovern, supra note 14, at 39. 1

Stiegel et al., supra note 6, at 694.

This was the common law rule. See supra text accompanying notes 41-43.

Bos, supra note 23, at 691; McGovern, supra note 14, at 34 ("[Ulnless powers of attorney are clear enough so that third parties can and will rely on them, they are virtually useless.").




Zartman, supra note 1, at 12-13.

In 1993, Georgia and Connecticut expressly authorized the use of a springing durable power of attorney, reducing the number of states that are silent on the issue to seven. Lori A. Stiegel, State Dunzble Power of Attorney Legisation: Enactments and Amendments, January 1, 1993-October 15, 1993, ELDER LAW FORUM (NovemberPecember 1993).



Id.

Id.

COLLIN ET AL., supra note 34, at 90.2.

Ruth R. Longenecker, Health Care Proxies, Living Wills and Durable Powers of Attorney, ALI-ABA Course of Study (1991); COLLIN ET AL., supra note 34, at 90.2.

See id.

Changing a power of attorney to a springing power may hamper its effectiveness by making third parties more reluctant to rely on the device because they are unsure if it has "sprung." Some states, however, have already responded to this problem by amending their durable power of attorney statutes. For example, in Connecticut and Georgia, a signed affidavit by the attorney-in-fact to the effect that the contingency has occurred serves as conclusive proof that the power has "sprung." Lori A. Stiegel, State Durable Power of Attorney Legislation: Enactments and Amendments, January 1 - October IS, 1993, ELDER LAW FORUM (November/December 1993).

Penelope A. Hommel, Guardianship and Al tmt ive Legal Interventions= A Compendium for Tkaining and Practice 34 (The Center for Social Gerontology) (October 1986).

Stiegel et al., supm note 6, at 695.

UNIF. PROBATE CODE Sec. 5-501 to -505 (prefatory note).

103. Jan Ellen Rein, PreseNing Digndy and Self-Determination of the Elder& in the Face of Competing Interests and Grim Alternatives: A Proposal for Statutory Refocus and Reform, 60 GEO. WASH. L REV. 1881, 1884 (1992).

104. COLLIN ET AL., supra note 34, at 81.

108. Barnes, supra note 4, at 749. The symposium referred to in the text is the Randolph W. Thrower Symposium, held at Emory University School of Law in Atlanta, Georgia on March 18, 1992. 1

I 109. Ditzen, supm note 4, at Al.

~ 110. See Stiegel et al., supra note 6, at 694 ("[A] frequently voiced concern about DPA's is that they are a 'license to steal,' because they do not offer a vulnerable principal

1 adequate protection against an agent's abuse or overreaching!').

I 111. Each county in New York has one or more surrogate judges. The surrogate court has jurisdiction over all matters relating to estates and the affairs of decedents. N.Y. SURR. CT. PROC. ACT 8201(3) (McKinney Supp. 1994).

112. The Elder Law Section of NYSBA newsletter is 'entitled, THE ELDER LAW ATTORNEY; AARP-LCE publishes ELDER LAW FORUM.

I

113. No responses were received from Alaska, Delaware, ~ i s s i b i ~ ~ i , and South Dakota. I

114. When the survey was distributed to members of the l~ew York State Bar Association this question mistakenly read:

Do the benefits of a Durable Power of Attorney Merit Further Attention?

Consequently, responses to this question from NYSBA members were not included in the final tabulations.

115. Based on this data there appears to be a need for protections against abuse that are unrelated to the capacity of the principal, or the principal's ability to detect abuse, as well as safeguards which protect the principal in the event s/he loses the capacity to act.

116. The authors recognize that a person receiving the survey may have been more inclined to complete and return it if she had encountered durable power of attorney abuse or had strong feelings as to the usefulness or danger of this legal device. Regardless of the motivation of survey respondents, the survey findings point to abuse.

117. See Ditzen, supra note 4, at Al; Zane, supra note 4, at A14.

118. This raises a collateral issue as to who should evaluate the choice of attorney-in- fact when the principal is in effect complying with the decision and wishes of a third party as to the agent.

119. The "powers" can be defined as what the instrument specifically enable8 the agent to do on behalf of the principal. Black's Law Dictionary defines "power" as "[tlhe right, ability, authority, or faculty of doing something." BLACK'S LAW DICTIONARY 1169 (6th ed. 1990).

120. SUSAN MILER AND SALLY BALCH HURME, STEPS TO IMPROVING GUARDIANSHIP MONITORING (1991). The authors suggest that effective court monitoring of guardianships is not occurring.

121. Waters, supra note 30, at 541.

122. Stiegel et al., supm note 6, at 691.

It would be desirable to require that witnesses in all jurisdictions also be able to attest to the principal's capacity to execute a durable power of attorney. However, there is no bright-line standard for assessing the capacity to execute such a document. Medical and legal professionals are reluctant to formulate such a standard, and with no clear standard, many feel assessing the competence of a principal who is not clearly lacking in capacity places an undue burden on witnesses and notary publics.

This issue also surfaces in determining when a springing power of attorney should be effectuated. The principal executing a springing power routinely designates a specified event or contingency that will trigger the power. Such a triggering event typically is the loss of capacity of the principal. The principal also designates one or more persons, usually the principal's physician(s), who are authorized to determine that the event or contingency has occurred.

125. S.C. CODE ANN. 5 62-5-50l(c) (Law. Co-op. Supp. 1993).

CONN. GEN. STAT. ANN. 5 45a-562 (West Supp. 1993); MO. ANN. STAT. 5 404.705 (Vernon 1990); N.H. REV. STAT. ANN. 5 506.6 (Supp. 1993).

N.Y. GEN. OBLIG. LAW 5 5-1501 (McKinney 1989).

LND. CODE ANN. 5 30-5-1-4 (Bums Supp. 1993).

Kolb, supra note 1, at 1346; see COLLIN ET AL., supra note 34, at 17.

MINN. STAT. ANN. 5 523.01 (West Supp. 1994).

See, e.g., MISS. CODE ANN. 5 87-3-1 (1989 & Supp. 1991). I

See supra note 71.

Kolb, supra note 1.

See generally COLLIN 3 3 ' AL., supm, note 34. The authors encourage the formal execution of a durable power of attorney.

S.C. CODE ANN. 5 62-5-501(c) (Law. Co-op. Supp. 1993).

In many states that have not enacted the statutory short form, and also in states that have a statutory short form, other pre-printed forms are sold.

See supra note 71.

CAL. Crv. CODE 5 2475 (Deering Supp. 1994).

WIS. STAT. ANN. 5 243.10(1)(a) (West Supp. 1993).

ILL. REV. STAT. ch. 755, para. 4513-3 (Smith-Hurd 1992).

McGovern, supm note 14, at 22

CAL. Crv. CODE 5 2475 (Deering Supp. 1994). California instructs the principal to fill in a blank with either "jointly" or "separately" if more than one agent has been named: "If I have designated more than one agent, the agents are to act

11 - The form then contains the following "explanation": IF YOU APPOINTED

MORE THAN ONE AGENT AND YOU WANT EACH AGENT TO BE ABLE TO ACI' ALONE WITHOUT THE OTHER AGENT JOINING, WRITE THE WORD "SEPARATELY' IN THE BLANK SPACE ABOVE. IF YOU DO NOT INSERT ANY WORD IN THE BLANK SPACE, OR IF YOU INSERT THE

WORD "JOINTLY', THEN ALL OF YOUR AGENTS MUST ACT OR SIGN TOGETHER.

N.Y. GEN. OBLIG. LAW 5 5-1501(l)(a) (McKinney 1989).

Id. i

CAL. W. CODE 5 2475 (Deering Supp. 1994).

WIS. STAT. ANN. 5 243.10 (West Supp. 1993).

COLLIN ET AL., supra note 34; see Stiegel et a]., supra note 6.

MISS. CODE ANN. 5 87-3-1 (1991); 20 A. CONS. STAT. ANN. 5 5602(~) (1990); S.D. CODIFIED LAWS ANN. 5 59-7-2.2 1993). b Based on conversations with Dean John Welsh, Acting Dean of Albany Law School, and the Albany, New York County Clerk's Office.

N.C. GEN. STAT. 5 32A-9(b) (Supp. 1993).

Durable Power of Attorney Act, ch. 49, 1993 Tex. Sess. Law Serv. 103, 104 (Vernon). Texas also requires that the document be in writing, signed by an adult principal, and witnessed and signed by two persons who are 18 years of age or older.

S.C. CODE ANN. 9 62-5-501(c) (Law. Co-op Supp. 1993).

Id. I

154. N.C. GEN. STAT. 9 32A-9(b) (Supp. 1993).

155. Waters, supra note 30, at 538.

156. Barnes, s u p note 4, at 749.

157. COLLIN ET AL., supra note 34, at 90.3.

158. McGovern, supra note 14, at 18 (citing Restatement (Second) of Agency 9 118 (1957)).

159. Stiegel et al., sup^ note 6.

160. N.C. GEN. STAT. 5 32A-13 (Supp. 1993).

161. Id 5 32A-13(a).

163'. MINN. STAT. ANN. 5 523.11(1) (West Supp. 1994).

164. Id 5 523.11(2). The statute defines "actual notice of revocation" to mean that the i

party has received a written instrument of revocation. In a real property transaction, actual notice means that written revocation has been received by the party or that a written instrument of revocation containing the legal description of the real property has been recorded in the office of county recorder or filed in the office of the registrar of titles.

165. See, e.g., ME. REV. STAT. ANN. tit. I&+ 5 5-504(a) (West Supp. 1993).

166. A question not addressed by any state stdtute is the situation where a principal who is believed to be incompetent attempts to revoke the power of attorney.

167. Bos, supra note 23, at 693.

168. Stiegel et al., supra note 6, at 694. In California and New Hampshire, the list of such persons includes the agent, the principal, or the principal's spouse, child, parent, heir, or beneficiary. California also includes the conservator, court investigator, and public guardian, while New Hampshire adds a treating health care provider or other interested person. The Missouri list includes the principal or principal's legal representative, an adult member of the principal's family, or any other person interested in the principal's welfare. Id.

Id at 695. 1 I

Moses and Pope, supra note 11, at 522. I See supra text accompanying note 39. I

HAROLD D. KLIPSTEIN ET AL, DRAFTING NEW YORK WILLS, 5 17.02, at 17-9 (1992) (citing Elco Shoe Mfrs. Inc. v. Sisk, 183 N.E. 191, 192 (N.Y. 1932)).

Id. at 17-9.

Id. (citing Lamdin v. Broadway Surface Advertising Corp., 5 N.E.2d 66, 67 (1936)).

N.Y. GEN. OBLIG. LAW 5 5-1601(2) (McKinney 1989). [Now the guardian. New York has since done away with the conservator or committee with its new Guardianship Law. N.Y. MENTAL HYG. LAW 5 81.01 (McKinney Supp. 1994).]

KLIPSTEIN ET AL., supra note 172 (citing Estate of DeBelardino, 352 N.Y.S.2d 858 (Surr. Ct. Monroe Co.) afd, 363 N.Y.S.2d 974 (N.Y. App. Div. 1974)).

S.C. CODE ANN. § 62-5-501 (Law. co-op. Supp. 1993).

IND. CODE ANN. 99 30-5-6-2, -3, -4 (Bums Supp. 1993).

A GLC survey respondent commented that "the durable power of attorney is usually given to a spouse or child or close relatives or friend who perform their duties without fanfare and usually without consideration for love and affection. Most of the time if such people did not accept these responsibilities, no one else would-- complete outsiders would not be accepted by most of the elderly people."

N.C. GEN. STAT. 8 32A-11(c) (Supp. 1993). h

Id.

IND. CODE ANN. § 30-5-4-5 (Bums Supp. 1993); MO. ANN. STAT. 5 404-725 (Vernon 1990).

Id.

Such a requirement would help reduce not only the incidence of durable power of attorney abuse, but also the severity of the abuse as agent's would no longer be able to misappropriate large amounts of assets without the principal's knowledge.

The costs involved with notification may present a problem. It is generally assumed that there are a great number of durable powers of attoney currently in use. If this assumption is correct, notification could involve large costs in terms of paperwork and postage. It is important to note that in all likelihood the banks would transfer these costs to the principal.

Because statutory short forms and other forms of durable powers of attorney often give broad and undefined powers, it can be difficult to prove that the agent was not acting in accord with the principal's approval or at the principal's direction. This is particularly true if the principal has lost the capacity to testify. Furthermore, many elderly persons are reluctant to bring criminal charges (or a civil suit) against a family member who has abused a power of attorney while acting as an attoney- in-fact.

OKLA STAT. ANN. tit. 22, 9 991a-5 (West Supp. 1994).

Id. 99la-7.

Id. $ 991a-8.

Id. $ 991a-9.

Id. $ 991a-10(4)(C).

Id. $ 991a-12.

NEV. REV. STAT. $ 193.167 (Supp. 1993); CAL. PENAL CODE $667.9 (Supp. 1993).

FLA. STAT. ANN. $ 415.101 (West 1993); ARIZ. REV. STAT. ANN. 3 46-451 (West Supp. 1993).

FLA. STAT. ANN. $ 415.102(9) (West 1993). The Florida law is broadly written to include "improper" as well as "illegal" use of elderly persons assets but is also very specific in that it includes the durable power of attorney and guardianship authority for handling the assets. "Improper" may include questionable acts such as the agent giving gifts to himself or herself under a durable power of attorney.

ARE. REV. STAT. ANN. $ 46-451(4) (West Supp. 1993).

A nationwide database would be more effective because of the extent to which people move across state lines.

ARE. REV. STAT. ANN. $ 46-455(N) (West Supp. 1993).

FLA. STAT. ANN. $ 415.102(7) (West 1993).

Id. 3 415.103(3)(a).

Based on a conversation with Ray De LaRosa, the Legal Services Developer at the Arizona Bureau of Aging.

Of the 270 cases of abuse reported, only 15 (6%) had resulted in a criminal conviction.

Of the 270 reported cases of abuse, 154 (64%) had been committed by "immediate family members." An additional 46 (19%) were committed by "other relatives."

BLACK'S LAW D I ~ O N A R Y 181 (6th ed. 1990).

In New York, for example, guardians, testamentary trustees, and executors are required to secure a bond so that the principal's assets are insured.

One way to cure this problem would be to allow any principal to waive the bond requirement when creating a durable power of attorney.

208. Schmitt and Hatfield, supra note 9, at 207.

209: Kapp, supra note 6, at 792.


211. Id.

It is important to note that if a third party did prematurely revoke the durable power of attorney on behalf of an incompetent principal, the revocation could not be cured by simply drafting another document because a principal must be competent to create a durable power of attorney. Consequently, a guardianship would be necessary to secure future assistance for the principal.

I The statutory short forms in both ~alifo+ia and Minnesota, for example, offer the option of nominating joint attorneys-in-fact. CAL. CIV. CODE 9 2475 (Deering Supp. 1994); M W . STAT. ANN. § 523.23 (West Supp. 1994).

214. McGovern, supra note 14, at 26 11.141.


216. Moses and Pope, supra note 11, at 525.

217. While any principal can require hisher attorney-in-fact to provide an annual accounting by writing that requirement into the document, no state explicitly mandates such an accounting. In Minnesota, the' statutory short form does provide an opportunity for the principal to require the attorney-in-fact to render monthly, quarterly or annual accountings to the principal or a thi party. MINN. STAT. ANN. 5 523.21 (West Supp. 1994). 1"

I

218. Rice v. Floyd , 768 S.W.2d 57, 59 (Ky. 1989). Every stat except West Virginia, authorizes courts to order guardians to file financial acco i ntings and eight states require that guardians do so. Susan Miler & Sally Balch Hurme, Guardianship Monitoring- An Advocate's Role, 25 CLEARINGHOUSE REV. 654, 655 (1991).

219. Miler and Hurme, supra note 218, at 655 ("Effective supervision of a guardian includes more than just receiving a periodic report. The court must establish procedures for reviewing and venfymg the reports . . . .").

220. In addition to this practical concern, some GLC survey respondents had a philosophical problem with requiring that an attorney-in-fact report to a court of law. To do so, in their view, would defeat the purpose of a durable power of attorney which is to serve as an alternative to judicially-controlled guardianships.

Miler and Hurme, supra note 218, at 655. For example, an ABA study and a pilot project sponsored by AARP's Legal Counsel for the Elderly "have revealed low- cost ways to improve monitoring, including using volunteer monitors." Id

In Minnesota, the attorney-in-fact is required to maintain complete records of all transactions entered into on behalf of the principal. MINN. STAT. ANN. 5 523.21 (West Supp. 1994). Furthermore, the principal, a guardian, an executor or any third party named in the durable power of attorney are entitled to examine and copy the records. Id. Other states should consider adopting similar provisions in order to allow for some sort of review of the agent's actions.

Although one option would be to provide for compensation to coincide with this requirement. I

ARIZ. REV. STAT. ANN. 46-454(B) (West Supp. 1993).

Id.

Id.

APPENDIX

GOVERNMENT LAW CENTER

In 1993, the Government Law Center of Albany Law School announced the Edgar A Sandman Fellowship Program. Two second-year Albany Law School students were selected as the fellows for 1993. Their research focuses on issues in elder law. The fellows' initial research project is on Financial Abuse of dhe ElderPy dhmugh D u W 8 Powers of Aftomey. In essence, the students are determining whether in fad abuse exists, and if so, what types of legal reforms may be necessary .to minimize abuse.

In addition to examining applicable state laws and practices relating to this issue, the following questionnaire has been designed to collect input from legal praditioners and senrice providers. The responses to this questionnaire will be included in a report containing recommendations for legislative and/or administrative action. National in scope, the report will be sent to legislators, administrative agendes, legal ~ ~ ~ ~ M K M w s , . . service providers, and various other organizations.

Please take a few moments to answer the following questions. Your answers witl be treated anonymously. Please pull out the survey, fold it, tape or staple it, and send it in the mail. tt is pre-addressed and postage paid, Kindly return by May 31, 1993 if possible. If you have any questions, please do not hesitate to contact Jonathan Federman or Meg Reed, the 1993 Edgar A Sandman Fellows, at (51 8) 445-2329.

Survey on Financial Abuse of dhe ElderPy dhmugh D~rabl8 Powers of Attorney

1. I am: (A) An attorney who practices elder law (6) A social worker for the elderly (C) Other

2. Please list the state(s) where you practice and briefly describe the nature of your work.

3. How long have you been involved with elder law issues?

4. 1 believe financial abuse of durable powers of attorney occurs:

(A)Frequently (B)Occasionally (C) Never

5.1 believe financial abuse of durable powers of attorney is a problem that merits further attention.

(A)Strongly agree (B)Agree (C) Disagree (D)Strongly disagree

ALBANY LAW SCHOOL 80 NEW SC(YTIANI) AVENUE, ALBANY, NEW YORK 12208-3494 (518) 445-2329 FAX: (518) 445-2303

6. 1 believe the benefits of a durable power of attorney outweigh the risks of financial abuse.

(A)Always (B) Never (C)Sometimes i

7. Other than careful selection of the attorney-in-fact and drafting of the durable power of attorney, do you think any of the following would help curb fiduciary abuse of durable powers of attorney (DPOA)? Are any of the following impractical solutions? (Please check all that might apply).

Helpful lm~ractical (A) Revising criminal statutes to impose harsher

penalties on those who abuse a DPOA - - (B) Mandating recording requirements for the DPOA - - (C) Requiring notification of principal (or dedignated

person) each time the attorney-in-fact takes significant action on behalf of the principal - -

(D) Creating a central registry that would list the names of all those who have served as an attorney-in-fact -

(E) Requiring a waiting period between execution of the DPOA and the use of the authority - -

(F) Requiring the appointment of a 3rd party to act jointly with the attorney-in-fact - -

(G) Requiring the appointment of a 3rd party to periodically check on the attorney-in-fact - -

(H) Requiring the attorney-in-fact to file an annual , . accounting with a court - -

(I) Requiring the attorney-in-fact to file an annual accounting with a 3rd party -

(J) Requiring the attorney-in-fact to purchase a bond I

to insure the principal's assets - (K) Escrowing the power of attorney so that it takes 3

effect only when, and if, the principal becomes incapacitated - -

(L) Requiring that a 3rd party be given the power to revoke the DPOA in the event the principal becomes incapacitated and cannot do so - -

(M) Other (please specify)

8. In your professional experience, have you encountered financial abuse of a durable power of attorney (if not, please skip to question 17)?

# - Yes - No

9. On how many occasions have you encountered such abuse? - 1 - 2 - 3 - 5 - 6 - 1 0 - 1 O+

Please select one incident to answer the following questions. It would be helpful if you could select the incident you deem most representative of your encounters with durable power of attorney abuse:

i

10. What was the relationship of the abuser to the principal? - Immediate family member - Other relative - Long-time friend - Newly-made acquaintance - Attorney - Other

11. Did the abuser act while the principal was competent? - Yes - No

12. How severe was the abuse? - Less than 25% of the principal's assets'were taken - Approximately 25% of the principal's as ets were taken -

b Approximately 50% of the principal's assets were taken

- Approximately 75% of the principal's assets were taken - More than 75% of the principal's assets were taken

13. Please describe the nature the abuse

14. Did the abuse lead to a civil lawsuit? - I Yes - No Was there a recovery? - Yes No

15.. Did the abuse lead to a criminal prosecution? - Yes -NO Was there a conviction? - Yes

16. Was the incident reported in the media? - yes -INO 17. COMMENTS (attach additional sheets if necessary):

18. OPTIONAL: Your name

Address *

Telephone

Thank you for taking the time to respond to this questionnaire.

Documents

ABUSE AND THE DURABLE POWER OF MARCH 1994...durable power of attorney in the 1%0s, were seeking to create a simple, inexpensive financial management tool. Over the last thuty years,