POA Fraud and Scams | blog.firstffcu.com

Along with the potential benefits associated with establishing a power of attorney, come potential risks to consider. Our first article in this series discussed what a power of attorney (POA) is – a legal document that ensures your wishes (typically having to do with your assets), are carried out in a manner that you as the principal approve of. It gives a trusted person (often referred to as an agent), the legal authority to handle these wishes. Anyone you trust – such as a family member or friend, can serve in this role for you.

Even when designating someone you trust as your POA, the risk of fraud and abuse can still exist. This person may perform actions that the POA document does not authorize, manipulate you or your assets for their own personal gain, or not act in your best interest.¹

There are several ways in which POA fraud and abuse can occur, so it is best to become familiar with some of them so you can recognize if it may be happening to you or someone you care about.

Financial Exploitation: In this instance, the agent may use the principal’s money for their own gain instead of the principal’s needs – often without informing the principal. They may withdraw funds from the principal’s accounts for their own use or conceal the reason for withdrawing the funds. They may justify an expenditure by saying it was for the principal’s benefit, but then use the funds for something that does not align with the principal’s needs or wishes.²

Unauthorized Gifting: This occurrence happens when the agent authorizes gifts to themselves or other family members without the authority to do so, without the principal’s knowledge, or without considering if it is in the principal’s best interest. Gifting is unauthorized if the POA does not explicitly authorize gifting, which can include recipients and the dollar amount(s) that may be gifted.³ If gifting is authorized – the agent should consider the principal’s entire financial situation, upcoming financial obligations, and if it is consistent with their personal character.³

Neglect of Duties: Neglect occurs when the agent does not provide care as required by the POA – such as meeting medical needs or providing adequate living conditions.² This can also take the form of neglecting financial responsibilities, such as not paying bills.

What are common red flags of POA fraud?

Bills are unpaid, even though there should be sufficient funds to pay them. This can suggest that the agent is using the funds for unauthorized purposes or neglecting to manage the principal’s financial obligations.
Sudden, unexplained changes to legal documents. Especially if the changes benefit the agent, or if the principal is unaware of or didn’t consent to the changes.²
Information is being withheld from the principal and principal’s loved ones. The agent may avoid answering questions or giving information about the principal’s financial situation, including their bank accounts or investments.⁴
The principal becomes isolated from loved ones. The agent may isolate the principal from those who care about them so that it is harder to detect if something is not right. Isolating the principal also allows the agent to exercise more control, without the potential for others to intervene.²

How can you protect yourself from POA fraud and abuse?

Choose your agent wisely. Choosing an agent that you trust, and whose values align with your own, to ensure they are capable of following your wishes and putting your needs first.²
Specify the scope of the POA. Clearly defining tasks, responsibilities, and decisions to be made on your behalf can minimize the potential for abuse.² This aligns the power that is legally granted with your intentions, and only gives the agent the authority needed to carry out your wishes.
Clearly communicate with your agent. Continually check in with your agent to confirm your wishes and preferences. Promptly make any changes you desire to the POA so that the agent remains aligned with your wishes.
Inform trusted individuals about your POA. By informing trusted individuals such as family, friends, and business partners about your POA – they can be on the lookout for any red flags that signal fraud or abuse.
If possible, remain involved in decision-making. Review the agent’s activity, such as any financial transactions they are conducting or any medical decisions they are making on your behalf. This encourages transparency between you and the agent and keeps you involved in your affairs, to the degree you wish to be.²

To report POA fraud, contact Adult Protective Services (APS) in your state or to the National Center on Elder Abuse (NCEA). Any identity theft incidents related to fraud should be reported to the principal’s financial institution, the local police, and to the Federal Trade Commission at identitytheft.gov.

If you are thinking about your financial future and retirement, as well as estate planning – the First Financial Investment & Retirement Center will be hosting an exclusive no-cost virtual seminar on the Transitions to Retirement with a Focus on Estate Planning, on Wednesday, October 8^th at 6pm.

(697533-1 and 622155)

You can also register for this session by contacting Maureen McGreevy, LPL Financial Advisor at 732.312.1534 or emailing maureen.mcgreevy@lplfinancial.com

Securities and advisory services are offered through LPL Financial (LPL), a registered investment advisor and broker/dealer (member FINRA/SIPC). Insurance products are offered through LPL or its licensed affiliates. First Financial Federal Credit Union (FFFCU) and First Financial Investment & Retirement Center are not registered as a broker/dealer or investment advisor. Registered representatives of LPL offer products and services using First Financial Investment & Retirement Center, and may also be employees of FFFCU. These products and services are being offered through LPL or its affiliates, which are separate entities from and not affiliates of FFFCU or First Financial Investment & Retirement Center.

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This material is for general information only and is not intended to provide specific advice or recommendations for any individual. For individual estate planning advice, consult with an estate attorney.