When Michigan residents are planning their estate, they often first think of preparing a will to pass on their assets to family members and other beneficiaries. There are other types of documents that can be important as well, including trusts, advance medical directives and financial powers of attorney. Unfortunately, the latter document can be abused if in the hands of the wrong person.
While powers of attorney traditionally become effective only in the event that the principal becomes physically or mentally incapacitated, this is not always the case. They are often designed to be used in situations where the principal is out of the country or is focusing on other matters such as running a business. When in the hands of an unscrupulous agent, they can be detrimental.
Some well-known athletes learned this lesson when they entrusted the control over their assets to a financial adviser who claimed that she possessed a Harvard education. She did not charge a fee and instead asserted that her goal was to build her clients’ wealth. What she actually did was loot her clients’ bank accounts to the tune of millions of dollars. She was subsequently convicted and sentenced to 10 years in prison.
Many estate planning attorneys take such an example into account when they are advising their clients who have expressed a desire to have a power of attorney prepared. An attorney might suggest that the power be granted to more than one party instead of just a spouse or close friend. These additional agents can include an accountant, an attorney or a financial adviser. If there are signs of trouble, the principal should formally revoke the existing document and prepare a new one.