Fiduciary Duties & Misuse of Power of Attorney
Sept. 30, 2022
A power of attorney (POA) can be a powerful tool to ensure your affairs and financials are handled in the proper way when you’re unable to do so. A power of attorney can also find themselves in a sticky situation if the person given the POA decides to put themself first, and there’s no one to witness.
For example, your aging father long ago entrusted a power of attorney to a friend to manage his finances should he become unable to do so. Your father, as he ages, starts showing signs of mental deterioration, and the POA takes effect, as planned when your father becomes incapacitated. The attorney-in-fact – the person given the POA – believes no one is watching and slowly begins transferring your father’s assets into his own name.
An attorney-in-fact, or the person given the POA, enjoys broad, almost unlimited powers but by law is expected to make all decisions in the best interest of the party granting the POA and its authority. The attorney-in-fact has a fiduciary duty to exercise the utmost care to base all decisions on the well-being of the grantor of the POA.
No personal enrichment is allowed unless the POA document provides a stipend or other remuneration for the attorney-in-fact, which could include the transfer of assets, but those transfers would have to be specifically authorized.
Transferring property without permission would represent illegal acts of fraud, embezzlement, or conversion. Elder abuse could also be involved, depending on the age of the person being ripped off through abuse of fiduciary responsibility by an attorney-in-fact.
If you suspect your loved one is the subject of fiduciary abuse by a designated attorney-in-fact in the Greater San Francisco Bay Area, contact the Law Offices of David H. Schwartz, INC, for legal support. Attorney David Schwartz has more than 45 years of experience in cases involving fraud and misuse of authority. He will meet with you, discuss the situation, and advise you of your legal options. He also stands ready to bring a civil lawsuit to address the situation.
The Law Offices of David H. Schwartz, INC. serves clients throughout the San Francisco Bay Area, including San Jose, Santa Clara, San Mateo, Oakland, and all of Alameda County, California.
What Is a Power of Attorney?
California law addresses the legal instrument known as a power of attorney in its Probate Code. Section 4123 of the code states: “In a power of attorney under this division, a principal may grant authority to an attorney-in-fact to act on the principal’s behalf with respect to all lawful subjects and purposes or with respect to one or more express subjects or purposes. The attorney-in-fact may be granted authority with regard to the principal’s property, personal care, or any other matter.”
The code also addresses language that should be included in a POA to warn the attorney-in-fact of the laws, obligations, and potential penalties involved in any misuse of authority:
“You may not transfer the principal’s property to yourself without full and adequate consideration or accept a gift of the principal’s property unless this power of attorney specifically authorizes you to transfer property to yourself or accept a gift of the principal’s property. If you transfer the principal’s property to yourself without specific authorization in the power of attorney, you may be prosecuted for fraud and/or embezzlement. If the principal is 65 years of age or older at the time that the property is transferred to you without authority, you may also be prosecuted for elder abuse under Penal Code Section 368. In addition to criminal prosecution, you may also be sued in civil court.”
Examples of POA Abuse
The most obvious example of how an attorney-in-fact can abuse a power of attorney and its principal is, as mentioned above, to siphon off assets to himself. If the principal is incapacitated or not paying attention, asset transfer and theft can go unnoticed.
Other examples of POA abuse include:
Changing or altering the principal’s last will and testament.
Interfering in the execution of a will by making distributions or allocations outside of probate.
Stealing the principal’s identity and using it for fraudulent purposes, such as obtaining loans or making purchases for oneself.
Selling the principal’s personal information online.
Transferring POA authority to others.
Creating a counterfeit POA by forging the principal’s signature.
Ignoring the desires and preferences of the principal under a health care power of attorney.
Breach of Fiduciary Duty
If the attorney-in-fact does commit any of these abuses, they can be held liable in civil court – and sometimes in criminal court – for abuse of fiduciary responsibility.
Such abuse can take the form of fraud, embezzlement, or fall under the civil wrong – or tort -- known as conversion. Conversion is, simply put, the taking of someone else’s property without their permission. This can occur with or without a power of attorney, but it is nonetheless actionable in a civil court proceeding.
If the principal is 65 or older, as mentioned earlier, California and federal law can hold the attorney-in-fact liable for elder abuse as well.
Preventing and Monitoring POA Abuse
The most important factor in protecting against abuse of a power of attorney is picking an attorney-in-fact who is honorable and trustworthy.
The POA document itself can help by setting limits on the attorney’s power and/or by making it a “springing” power of attorney that takes effect only when certain events happen – such as the principal’s sudden incapacitation – or when certain conditions arise – such as the principal is out of the country and unable to make day-to-day financial decisions.
Note also that, under California law, POAs do not terminate. If you wish your POA to have an end date, you must specify so in writing.
Fortunately, for the principal who grants a power of attorney, should they become incapacitated, family members can step in to contest the actions of an attorney-in-fact and take the legal action necessary to stop abuse and seek restoration of assets.
Rely on Skilled Legal Advocacy
Once you suspect an attorney-in-fact of abusing their fiduciary duty – or of committing power of attorney abuse through self-enrichment or other means – you need to seek legal advice immediately.
If you or a loved one are seeing a legitimate power of attorney being abused by the attorney-in-fact to the detriment – and loss – of the principal who authorized the document, contact the Law Offices of David H. Schwartz, INC, immediately. Attorney David Schwartz has the resources to stop the abuse and take legal action for the return of fraudulently obtained assets or seek compensation for their loss. He proudly serves clients throughout the San Francisco Bay Area, including San Jose, Santa Clara, San Mateo, Oakland, and Alameda County, California.