POA Abuse Signs: The Fraud Triangle

Posted on Mar 10, 2017 in Power of attorney abuse NC

How to look for POA abuse signs? For starters know the Fraud Triangle.

The Fraud Triangle is 1) Opportunity, 2) Pressure, 3) Rationalization.  Other terms include: Perceived Opportunity, Perceived Pressure, and Rationalization.

What does that mean when you are considering appointing someone as your Attorney-in-Fact or Power of Attorney agent? If your agent fits one of these three sides of the triangle, then they are likely not fit to serve as the agent of your assets.

Perceived Opportunity: This is the ability to execute a plan without being caught. For instance there is no one that the POA agent has to report to or account to. In this situation the principal is unprotected from embezzlement, self-dealing, misappropriation, excessive gifting by the agent. All my Durable POA’s now require the agent to give at least an annual accounting to a named third party. For example if I name one child as agent, then I require in the Durable POA language that the agent report to the other child.

Perceived Pressure: Does the agent have a job? losing his or her job? Does the agent have a failing business? Does the agent have debt issues? Going through a divorce? Does the POA have a family member with these issues? These are perceived pressures. They are emotional or financial forces on the POA or A-I-F that may pressure them to take money, gift money to themselves, etc.

Rationalization: This is how the POA/A-I-F justifies committing the dishonest act. Most people consider themselves honest. They often see themselves as victims. They develop a thought process to explain their behavior to make them acceptable. ¬†For example: “I’m the only one taking care of Grandma.” or “This is a loan, I’ll pay it back” (except there’s no loan documents and approval by the principal’s attorney). or “I have to have this to keep my house from foreclosure, momma would want this.” Keep in mind, the principal is usually elderly or under a disability, and is incapable of giving proper consent to these acts.

Bottom line: the best practice is not to put a person like this in this position of trust. However, if it’s already done, then if these pressures exist, be careful, family and friends should be aware of what is happening. Safeguards need to be in place. Disclosure of financial activities needs to occur.

When someone takes assets from an elderly person without consent, without being in the best interest of the elderly person, without proper reporting, accounting and controls, it’s elder abuse.

North Carolina fiduciary litigation attorney, Kirk Sanders, has litigated numerous trust and power of attorney abuse cases. Call 336-723-7200

Randolph County Courhouse (old courthouse)