Benefits of a Power of Attorney: Financial Protection for Older Adults

Many senior citizens are victims of financial abuse and scams perpetrated by adult children or other loved ones. Assigning a power of attorney is one way to protect against it.

A power of attorney and other financial planning documents can help protect older people from scams and financial exploitation, and support wise money management.

A power of attorney or conservatorship can help protect older adults and ensure they have the resources they need to secure senior living. Contact a local elder law attorney for legal advice about ways to plan for the future.

Benefits of a Power of Attorney

Stuart C. Bear, an elder law and estate planning attorney at Chestnut Cambronne in Minneapolis, recalls working with an older woman who needed financial protection from her grandchildren. “I would see her in the nursing home, and at one of our visits, she said, ‘Stuart, I’m so glad you’re here. You’ve got to help me. I feel as if I’ve become the family ATM machine,” Bear says. “‘Help me protect myself.'”

A power of attorney (POA) is a document that designates another adult to manage the principal’s financial affairs. It appoints a concurrent authority without surrendering any personal rights to property and bank accounts. The document appoints a trusted person to ensure that decisions are made in the person’s best interests.

“I’ve had lots of cases where kids are stealing their aging parents’ finances and don’t seem to think that’s wrong in any way, shape or form,” says Mary Joki Ebb, an elder law and estate planning attorney at Mary Ebb Law in Vadnais Heights.

It is important to know the characteristics of the different types of power of attorney documents to protect against financial exploitation by caregivers and family members.

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The Different Powers of Attorney

A durable power of attorney is effective when signed and continues until the person revokes it or dies. “The beauty of a durable power of attorney is when the representative notices that a senior may need some assistance, they can instantly step in,” Bear says. It’s also a fairly straightforward document that only takes about an hour of an attorney’s time (and, as such, should cost under $500).

Everything goes into the durable power of attorney document, allowing for detailed arrangements. “It has more clout in a lot of situations,” Ebb says. “Especially if you have a lot of assets, it just has more punch.”

A springing power of attorney “springs” into effect when the principal is incapacitated in some way. Bear typically advises against this type because its effectiveness hinges on a clear, sudden change in their physical or mental health. It can be harder to use the document when faced with a gradual decline in mental and physical capabilities.

The simplest option in Minnesota is a Statutory Short Form — a document created by the state legislature that only requires filing, rather than drafting a new document. You cannot modify the form, but it does allow you to select whether or not you want the power of attorney to continue or end if you become incapacitated.

Conservatorships for Elderly Parents

If you don’t get a power of attorney, your loved ones may have to go to court to appoint a conservator to manage your finances, credit cards, and savings accounts.

A conservatorship is a court procedure in which the court appoints a conservator to manage an individual’s estate. A conservator is often appointed when an individual didn’t obtain a power of attorney while they had capacity. A family member may file a petition with the court to become the conservator. The court grants specific powers depending on the living and financial situation.

The costs of a conservatorship are generally higher than those of a power of attorney. It may cost between $3,000 and $5,000, or more if it’s contested.

Conservatorship vs. Power of Attorney

Unlike a power of attorney, a conservatorship does cause a loss of autonomy. “The court sees this as a last resort,” says Bear. This is an option for older people with memory loss issues or a diagnosis of Alzheimer’s disease or dementia.

Conservatorships may be a way to end manipulation or maltreatment. Most elders don’t want a conservatorship because they think it means they are incapacitated, Ebb says. “It mostly means they’re unable to make decisions in their own best interests.”

Only the court can remove or replace the conservator. This safeguards against pressure from the family to change the power of attorney document for their personal gain. “They think they should have it all, and they’ll go out and have mom and dad sign a new power of attorney, and a lot of times mom or dad may not be competent at that point to make that kind of decision,” Ebb explains.

Avoiding Mistreatment by Planning Ahead

By the time the problem starts, “I don’t want to sugarcoat it, the money is going to be long gone,” Bear says. However, when you see red flags of potential abuse, there are ways to wall off personal finances for protection, while still giving access to trusted family members. Minnesotans can protect themselves or a loved one from financial exploitation by planning up front.

As for the woman who told Bear she felt like an ATM machine? After her grandchildren consistently asked for money, it had become apparent that they were likely using the money for drugs and alcohol, and not simply down on their luck. “I wrote a letter to all the family members and said, ‘Whether you like it or not, I’m her lawyer, and everything has got to go past me,'” Bear says.

A responsible family member oversaw her accounts and paid her bills on her behalf under her power of attorney. The rest of the family had to submit requests in writing and avoid unplanned visits.

“She wasn’t giving up anything. She was appointing some tough guys to look out for her. And that worked really, really well,” Bear says. “She lived the last years of her life protected.”

Find the Right Elder Care Attorney

Planning ahead of time can help avoid some of the pain and costly mistakes of waiting until you need legal help. Elder law attorneys can also help with Medicaid planning to ensure you get the healthcare benefits you deserve. An experienced elder law attorney can help you through the process of getting a power of attorney or conservatorship.