Frequently aging seniors require some assistance in managing their financial affairs. Whether out of necessity or convenience, an elderly parent will sign a Power of Attorney giving one of her adult children the legal right to pay her bills, access their checking and savings account, sign rental agreements and generally relieve the parent of burdens of financial decision making.
Certainly, the Power of Attorney (POA) can be used for this purpose. It is a document by which one person gives another person the legal authority to act on her behalf. It can be narrowly drawn, such as a POA to enable a purchaser to appoint someone to sign the closing documents if the purchaser will be out of town at the time of closing. Or, a POA can be quite broad and empower one person to handle all of the finances of another person.
However, the POA cannot always prevent financial harm to a senior. For example, if a senior is living in a house alone, it is common for unscrupulous contractors to go door-to-door scaring the elderly into paying large sums of money for unneeded home repairs. A classic example of this financial abuse is for the contractor to conduct a quick “inspection” of the roof, and then warn the elderly homeowner that the roof likely collapses unless $10,000 in repairs and replacement take place as soon as possible. The contractor is then paid all of the funds in advance, and then never returns to do the work.
Seniors have also been tricked into giving tens of thousands of dollars to investment schemes promising large annual returns, but ultimately proving to be worthless.
To prevent this type of financial abuse, the adult children of the elderly may need to consider petitioning a court for a formal Conservatorship for a parent with the help of an estate lawyer. A Conservatorship is a formal decree issued by a judge which allows the adult child to be the only person who can financially act on behalf of the aging parent. Unlike a POA, where both parent and child can each make financial decisions, in the Conservatorship the son or daughter is given the exclusive right to manage the financial affairs of the elderly.
Therefore, a door-to-door unscrupulous contractor would not be able to exploit the aged homeowner if there was a Conservatorship in place for the simple reason that the homeowner’s Conservator would have the exclusive authority to sign checks or withdraw funds from a savings account.
The downside to a Conservatorship is that the formal adjudication process may be deeply embarrassing to the elderly parent. The law requires that the parent be officially served with the court documents alleging that he or she lacks the mental ability to handle one’s financial affairs. Ironically, this act of love and concern by the adult child may have the unintended effect of causing a deep emotional rift between parent and child.
As you can see, this is a tough choice for the children for aging parents.