A colleague recently related the following story, illustrating how powers of attorney can be abused.
Her client, Gloria, had started thinking about going into an adult living community because taking care of the house was getting to be more and more of a chore. Besides, several of her friends had made the move and loved it.
Gloria called a realtor who did some research on the value of her home and came back with disturbing news. The realtor told Gloria that the house was not worth as much as the mortgage.
This really caught Gloria by surprise. To her knowledge, the house mortgage had been paid off when her husband died eight years earlier. She called the attorney who had been involved and asked for help. He told her that indeed the old mortgage had been paid off, but a new one had been put on the property by Gloria’s son less than a year later for $300,000. All without her knowledge or permission.
Gloria had no idea how this had happened. The attorney told her that her son Mike had used thepower of attorney she had given him to take out the mortgage.
What is a power of attorney? A power of attorney is the grant of authority to act for another person in legal or financial matters.
When confronted, Mike admitted that he had borrowed money against the house. It turned out that he had a gambling problem and needed the money to pay outstanding debts. He had been paying the mortgage on the property from his cash flow but was just about out of money and it looked like the house might go into foreclosure. Gloria was devastated.
Her lawyer contacted the police. The police said that it was a money matter between family members and that they were not going to get involved. Even if they had been willing to get involved, it is unlikely that Gloria would have pressed charges or that it would have solved Gloria’s real financial issue, which was how to save her house from foreclosure.
With an aging population, this type of incident is starting to happen with more frequency. Enough so that lawmakers throughout the US are starting to pass laws to increase oversight, limit powers and make this behavior criminal.
While this is good, it may not be enough.
What Gloria really needed in her case was a greater level of oversight.
We have different methods for helping our clients work through these types of issues. But each family situation is different. If this is something you would like to discuss, please give us a call.