Hanlon Niemann Blog | A Freehold, New Jersey Law Firm

Fredrick P. Niemann, Esq., a Power of Attorney Lawyer

The misuse of powers of attorney to exploit the elderly appears to be on the rise, but a new AARP report says that states can improve protections for older people by adopting a model law that addresses this type of abuse.

For most people, the power of attorney is the most important estate planning instrument — even more useful than a will. A power of attorney (POA) allows an individual to name a trusted person — their agent — to make financial decisions for them if they ever become incapacitated.

But while a POA avoids the costly and time-consuming process of having a court appoint a guardian or conservator, it also confers a great deal of authority on the agent. This is why advocates for the elderly often call the POA a “license to steal.” Increasingly, it seems, dishonest agents have been taking advantage of this license. AARP says that adult protective services and criminal justice professionals are reporting “an explosion” of financial exploitation cases of this type against the elderly.

Powers of attorney are regulated by state law and most states lack adequate safeguards, AARP contends; not New Jersey however. “New Jersey has strong fiduciary laws that are readily enforceable by the courts” says Fredrick P. Niemann, an elder law attorney in Freehold, Monmouth County, New Jersey.  New Jersey has laws on Powers of Attorney to offer help to protect people who execute POAs and discourage POA abuse. “There are stringent requirements for agents to exercise certain powers, as well as provisions making malfeasant agents liable for damages, attorney’s fees and costs”, says Niemann.

The AARP report, “Power of Attorney Abuse: What States Can Do About It,” compiled by the American Bar Association Commission on Law and Aging under contract to AARP.

For further information and advice on Powers of Attorney, do not hesitate to contact Fredrick P. Niemann at 732-863-9900 Ext. 101 or 105, or fniemann@hnlawfirm.com.

A recent appeals court rules that a durable power of attorney that allows the agent to “make gifts” does not accord the power to change retirement plan beneficiaries or to make large gifts of personal property absent specific authorization in the document.  In this case, Ronald Slomski executed a power of attorney naming his mother, Rita Slomski, as attorney-in-fact. The document authorized the attorney-in-fact to “make gifts” but it did not contain further instructions regarding gifting powers. Shortly before Mr. Slomski died, his mother, acting under the power of attorney, changed the beneficiary designation on his retirement account from his step-children to his siblings. She also used the document to distribute some $115,000 of Mr. Slomski’s assets to his siblings. Mrs. Slomski claimed that she was acting on her son’s instructions.

Mr. Slomski’s step-daughters and his estate sued Mrs. Slomski, claiming that she lacked the proper authorization to make gifts. They argued that Pennsylvania law requires that a power of attorney specifically grant the authority to make unlimited gifts. Mrs. Slomski maintained that the statute grants an attorney-in-fact broad powers to manage bank accounts and retirement plans and that the change in beneficiaries should not count as a “gift.” The trial court ruled that Mrs. Slomski had the power to change the beneficiary designations but not to make the large distribution to the siblings. Both sides appealed.

The Court found that the power of attorney does not grant Mrs. Slomski the power to make unlimited gifts or to change the beneficiaries of the retirement plan. Citing the statute’s requirement that a power of attorney specifically authorize even limited gift making, the court says “if the phrase ‘to make gifts’ is insufficient to vest an agent with the authority to make limited gifts, it is clearly insufficient to vest an agent with the broader authority to make unlimited gifts.”