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Fiduciary Duties and Misuse of Power of Attorney

Law Offices of Lawrence H. Nemirow PC June 20, 2023

A power of attorney (POA) is a legal instrument that gives someone else the legal authority to make decisions in your name. POAs are generally focused on financial and health care considerations, and often take effect when the owner of the document becomes incapacitated and is unable to make decisions on their own. 

A POA is thus an open vehicle for abuse by a designated agent, or attorney-in-fact who does not have to be an actual attorney, but is given the power over one’s financial and other affairs of life. Elder abuse and other frauds can result. Someone with a POA can transfer assets, including real property, into their own name with the authority given them by a POA. 

By law, the person granted the power of attorney has a fiduciary responsibility to act in the best interests of the grantor, so there can be legal ramifications if they act in a way that is self-rewarding or otherwise does not protect the well-being of the POA’s owner. 

If you believe your loved one is being unfairly treated or taken advantage of by someone with a power of attorney in or near Los Alamitos, California, contact me at the Law Offices of Lawrence H. Nemirow PC. As an estate planning attorney, I will examine your case, determine if a breach has taken place, and advise you of the best path forward to protect the rights and interests of your loved one.  

An Overview of Powers of Attorney

A power of attorney (POA) must be carefully considered and crafted, and the person given the POA must be someone who is thoroughly trustworthy and reliable. A POA, of course, can be either limited or general. A limited POA could be for health care decisions or for a focused financial transaction. A general POA would basically bestow all rights for decision-making on the named attorney-in-fact, who as mentioned earlier does not have to be an actual attorney.

A power of attorney can also be crafted as a “springing” document. This means that the POA takes effect only upon a certain event, usually the incapacitation of the grantor of the POA. A durable power of attorney means that it takes effect immediately, as opposed to a springing power of attorney.

A healthcare POA—also known as a medical power of attorney or a durable power of attorney—is a legal document that designates a person (known as a healthcare agent or proxy) to make medical decisions on your behalf when you’re unable to do so yourself. someone to make medical treatment decisions for you when you cannot. This document is part of an advance directive—a set of instructions regarding your healthcare preferences.

A financial or general POA would do the same in the realm of asset management, day-to-day cash flow, and debt considerations. You can also authorize a POA if you’re going to be on an extended overseas vacation, or military duty, to have someone else manage your affairs for you. 

In California, a power of attorney typically has to be notarized for it to be considered valid.   

Common Types of POA Abuse

Obviously, if someone else is given carte blanche over your financial existence, there are all kinds of adverse consequences if your designated attorney-in-fact is so inclined. Some of the more obvious abuses include: 

  • taking funds from your bank account or other investment instruments 

  • transferring real property to their name or selling it outright 

  • placing your personal information and identity online for sale 

  • changing the principal’s will  

  • continuing to act in the principal’s stead even after their death 

  • raiding the principal’s retirement account 

Violations can also amount to elder abuse depending on the age of the person who granted the POA. 

What Does “Breach of Fiduciary Duty” Mean?

You need to carefully consider the person you’re going to name as your agent or attorney-in-fact with a power of attorney, whether for health care or financial purposes. The person or institutional representative must be absolutely trustworthy.

Your attorney-in-fact will be subject to what is called fiduciary duty. This basically means that the person or entity so empowered must always act in the best interest of the person granting that power. Fiduciary duties include the duty of care, loyalty, good faith, confidentiality, prudence, and disclosure. 

In fact, the standardized power of attorney agreement made available by the State of California includes the following wording and warning: 

“By acting or agreeing to act as the agent (attorney-in-fact) under this power of attorney you assume the fiduciary and other legal responsibilities of an agent. These responsibilities include: 

  • “The legal duty to act solely in the interest of the principal and to avoid conflicts of interest." 

  • “The legal duty to keep the principal’s property separate and distinct from any other property owned or controlled by you.” 

Your Right to Revoke a Power of Attorney

You are allowed to revoke a power of attorney in California so long as you are deemed of sound mind. This could be an issue if you’ve bestowed a POA on someone and then become incapacitated.

However, family members and loved ones can also challenge a power of attorney if they believe the agent designated is abusing their power. It can be a difficult process, but it begins with petitioning the court to revoke the POA. At the first sign of abuse, seek legal help and begin the revocation process. In any legal matter, time is always of the essence. 

Get Trusted Legal Guidance

If you believe your loved one is being taken advantage of via a power of attorney he or she previously granted, you should seek immediate legal counsel. There are ways to challenge and revoke a POA if the grantor is unable to do so on their own because of incapacity or other health issues.  

If you are facing such a situation in or around Los Alamitos, California, contact me at the Law Offices of Lawrence H. Nemirow PC. I am an experienced estate and probate attorney and will review every aspect of your concerns and advise you on how best to proceed. I proudly serve clients throughout Los Angeles County, Orange County, Huntington Beach, Newport Beach, Cerritos, Santa Ana, Anaheim, and Long Beach.