A tough lesson for this lady. I would further mention that clients often ask me if they should name someone as a joint account holder on bank accounts. In certain states a joint account holder not only has access to the funds but if they have a pending judgment, bankruptcy or divorce, the government/ex spouse/creditor can access these funds to pay down the liability of the person you’ve just added to your account. There are better solutions. Here is the article:
Question: As part of my estate planning, my attorney prepared a power of attorney for finances which appointed someone who was then my good friend. I did as my attorney recommended and gave my friend copies of the documents and discussed my preferences with her. We went to my bank together and I had her added as power of attorney on my accounts. It was understood that she would not use the accounts unless I became incapable of paying bills or handling my own finances.
Less than three years later and unbeknownst to me, my friend began having financial difficulties and started using the power of attorney to “borrow” money from my accounts! Months went by and my bank finally thought to contact me to see if what she was doing was appropriate. Imagine how devastating it was to find out that my good friend thought it would be OK to take money from me! Worse yet, the bank says it has no responsibility for my loss because I was the one who signed her on to my accounts. I am heartsick. I have lost a lot of money along with a good friend. The D.A. wants me to bring criminal charges against her. Please warn your readers about power of attorney documents and how easily they can be misused.
Answer: Attorneys say that giving someone a power of attorney is like issuing a license to steal. As your situation points out, in the wrong hands, a power of attorney document can be a potent tool for theft. Unfortunately, a power of attorney for finances document is also an extremely important part of an estate plan and, without it, a trustee, executor or agent may have significant challenges in helping you manage finances should you become incapable of doing so yourself.
In your situation, please recognize that you have not lost a “good friend.” She was not your friend; friends do not steal from you. Embezzlers usually believe that they will just “borrow” funds and then replace them before they are missed. Rarely does it play out this way.
Yes, a power of attorney is an important part of estate planning but how can we reduce the risk of misuse? Generally speaking, there are two types of power of attorney documents: one that contains a springing power and a second that is effective immediately upon execution. A springing power of attorney is a document that gives another authority to act on your behalf only in the event of your incapacity. The document lies dormant until incapacity is determined by a physician at which time it “springs” into force. With a document like this, the bank would have needed to see a letter from a doctor before honoring the power of attorney.
An immediately effective power of attorney is, as the name states, immediately effective. One way to reduce the risk of misuse of an immediately effective power of attorney is to have your attorney keep the original document in their office. If the agent named in the document needs to conduct business on your behalf, they would be forced to contact your lawyer who could then investigate the situation.
I am sorry that you had this experience – you did everything right. Unfortunately, your trust and confidence were exploited.