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Ries, Nola M --- "When powers of attorney go wrong: Preventing financial abuse of older people by enduring attorneys" [2018] PrecedentAULA 54; (2018) 148 Precedent 9


WHEN POWERS OF ATTORNEY GO WRONG

PREVENTING FINANCIAL ABUSE OF OLDER PEOPLE BY ENDURING ATTORNEYS

By Nola M Ries

Enduring powers of attorney (POAs) are valuable, but risky, legal instruments. Research reveals several common problems that underlie abuse of the POA role: inadequate knowledge; family conflicts; attitudes of entitlement; secrecy about money; and lack of planning and preparation for financial decision-making. Lawyers have an important part to play in preventing this form of elder abuse.

A POA is an important and convenient legal tool by which older clients can protect their financial and property interests in the event of their future cognitive impairment. POAs are widely promoted and around 60 per cent of Australians of Anglo-Celtic and Eastern European backgrounds have made a POA.[1] In the best case scenario, an older person appoints one or more trustworthy and financially capable attorneys who will carry out their role responsibly and in the interests of the principal. Regrettably, this is not always the case. POAs can be used improperly to facilitate the financial abuse of older people with devastating impacts on their economic circumstances and personal wellbeing.

LAW REFORMS TO ADDRESS ELDER FINANCIAL ABUSE

Recent public inquiries have focused on elder abuse,[2] as well as power of attorney statutes,[3] and have proposed reforms to address financial abuse committed by enduring attorneys. These include nationally consistent laws for enduring appointments, mandatory registration of POAs, more rigorous monitoring of those acting in the role and harsher penalties for errant attorneys. In its 2018 budget, the Commonwealth government allocated $22 million to elder abuse initiatives and committed to working with states and territories to develop a national online POA registry.[4]

While laudable in principle, law reform initiatives take time and there is little research-based evidence to tell us which laws work best to reduce the occurrence of elder abuse.[5] In a 2017 report, the Law Council of Ontario, Canada, observed: ‘The lack of a meaningful evidentiary base regarding the use and misuse of substitute decision-making powers adds considerable difficulty to the task of law reform in this area. This is particularly true for POAs.’[6] Australian researchers have commented that measures to address financial elder abuse, including statutory reforms, ‘have been put forward in a reactive response to public concerns without sufficient empirical and theoretical rationale’.[7]

So what is the current state of theory and evidence to help us understand why some POA arrangements go wrong? And what can lawyers do to help prevent older clients from being abused in this way?

THEORY AND EVIDENCE ON ELDER FINANCIAL ABUSE

All forms of elder abuse are under-detected, but financial abuse appears to be a more common type of abuse, often accompanied by emotional abuse and manipulation. Adult children and other family members are most often the perpetrators, a troubling fact that suggests that ‘families can be dangerous places rather than the “haven”, “refuge” or “hearth” of popular discourse’.[8]

Theoretical explanations

Various theories have been proposed to explain why people mistreat their ageing parents or other relatives in this way.[9] Life course and stress process theories posit that the stressors of major life transitions – such as taking on financial management for a parent with worsening dementia – can lead to abusive situations when supports and coping strategies are inadequate. More prosaically, routine activity theory suggests that a person who manages an elderly parent’s assets may misuse money because the opportunity is available. There is no one-size-fits-all explanation and current thinking favours a contextual theory of elder abuse. This approach focuses on the factors that elevate or reduce the risk of abuse in the context of an older person’s personal circumstances, their relationships, and the broader community and society in which they live.

Data on abuse of powers of attorney

POAs are powerful legal instruments, yet there has been surprisingly little research undertaken to understand the dynamics of this form of advance financial planning among older people and their families, how attorneys function in the role, and why some attorneys abuse their power. However, several recent studies in Australia, the UK and the US are starting to fill gaps in our knowledge about this area. Researchers in Queensland have analysed guardianship tribunal cases[10] and complaints made to Aged and Disability Advocacy Australia (ADA Australia) about improper use of a POA.[11] Researchers in the UK recently examined cases heard by the England and Wales Court of Protection to revoke, replace or seek other remedies in relation to POAs.[12]

Other studies have used interviews and surveys to gain insights into elder financial abuse, including the improper use of POAs. A Queensland study involved interviews and surveys of around 100 principals or potential principals, attorneys and witnesses,[13] and a research project in Victoria specifically sought views on financial abuse from older people with culturally diverse backgrounds.[14] American researchers explored the perspectives of members of eight families where financial abuse was perpetrated by a relative acting in a POA role.[15] They also collected survey and interview data from 60 people to compare families with successful POAs in place and those where an attorney had acted improperly.[16]

These studies reveal reasons why some POA arrangements go wrong and suggest ways to help prevent problems.

HOW COMMON IS IMPROPER USE OF A POA?

According to the Australian Law Reform Commission’s 2017 inquiry into elder abuse, POAs are used to facilitate financial abuse ‘in a significant minority of cases’.[17] A Western Australian investigation into elder abuse found that improper use of POAs was a common concern; six out of ten case studies of financial abuse involved POAs.[18] A Queensland study of elder abuse complaints to ADA Australia found that POAs were ‘being used as a tool to perpetrate abuse against the vulnerable in many cases’.[19] The incidence of this form of abuse can be expected to increase as the population ages, wealth continues to accumulate in the older demographic, and more people live longer with dementia and other conditions that impair their cognitive abilities.

HOW ARE POAs USED IMPROPERLY?

Improper use of POAs can occur in several ways. The attorney may prematurely take control over financial management when the older person still has the ability to make decisions for themselves and prefers to manage their own affairs. Data collected in the US found that 57 per cent of people exploited by an attorney had decision-making capacity, ‘indicating that even intact faculties cannot guarantee that one will not be victimized’.[20] Where the POA is activated appropriately, the attorney may act in ways that are against the interests of the older person or outside the boundaries of the authority conferred in the POA. Misbehaviour may be gradual and escalate from inadvertent misuse by a well-meaning attorney to more serious and intentional abuse of their position of trust and power. Predatory individuals may deliberately seek a POA to use an older person’s assets for their own benefit. This situation, however, has not as yet been the focus of research.

WHAT ARE THE FACTORS UNDERLYING IMPROPER USE OF A POA?

Studies reveal common problems that underlie the improper use of a POA: inadequate knowledge about the role and responsibilities; family conflicts; secrecy about money; and lack of planning and preparation for the financial decision-making role. An attitude of entitlement to an older relative’s assets also often drives financial abuse.[21] Family members who have a poor relationship with the older person, who are dependent on them for financial support or accommodation, and who have personal difficulties with mental ill health, substance use, and gambling may also be more likely to engage in improper behaviour if entrusted with the POA role.[22]

PREVENTING POA ABUSE - WHAT CAN LAWYERS DO?

A NSW parliamentary inquiry into elder abuse observed that POAs ‘fundamentally rely upon an attorney honouring the significant trust placed in them by the principal’.[23] Preventive measures are needed to ensure that people appointed as attorneys are suited to the role and are equipped with knowledge and supports to act in a manner that honours that trust.

Improve selection of attorneys

A key preventive step is to help older clients to carefully select enduring attorneys. Several areas should be discussed. First, is a prospective attorney already engaging in behaviour that may constitute abuse, such as pressuring the older person for money, trying to restrict their social activities, or making threats? Does the prospective attorney behave as if they are entitled to use the older person’s assets for their own purposes? Questionnaires covering differing forms of elder abuse and risk factors are available from elder abuse helplines and can be used to guide discussions with older clients.[24] Where abusive behaviours are detected, the lawyer should counsel older clients on their options to stop the abuse.[25]

Second, the proposed attorney’s ability to perform financial management functions should be discussed. What is their track record in managing their own money, are they interested in learning new skills to carry out the attorney role, and how much time do they have available? Is the client’s choice of attorney influenced by imprudent assumptions about family and gender roles, such as a belief that an eldest son should take on the POA role, even where a daughter may be better suited?

Third, the strength and quality of the client’s relationship with the proposed attorney should be canvassed since a poor relationship history may increase the risk of future abuse.[26] Ask older clients about positive and negative interactions with a proposed attorney; for example, how often do they enjoy phone conversations or social outings together? Conversely, how often do they argue? If a client is considering joint attorneys, what is the quality of the proposed appointees’ relationship and their ability to cooperate?

If a suitable family member or friend is not available for the POA role, clients should be made aware of professionals who may be appointed, such as a lawyer, accountant or trustee. Victoria’s Office of the Public Advocate publishes a booklet of tips to help older people in choosing a POA, which is a useful example of a plain language resource to improve the selection of attorneys.[27]

Provide education about the POA role

Recent studies of POA abuse reveal that lack of knowledge is a key deficiency of both older people and their attorneys. Principals need to understand the scope of the legal power they are giving to their attorney, the ability to put restrictions on the role, and what to do if they have concerns about their attorney’s conduct.[28] Attorneys report that they need more information on how to carry out their role responsibly, including guidance on financial decision-making, record-keeping, and managing conflicts of interest.

Encourage financial communication and planning

Taking on financial management responsibilities for a family member in declining health is a stressful experience. Unfortunately, there is often little preparation for this transition. According to a recent review of research on financial communication in families, money matters are often considered ‘a private affair, even among couples’[29] and ‘[i]t is common for grown children to report never talking to their parents about money’.[30]

Older clients should be encouraged to discuss their financial wishes with their appointed attorney and to document any specific instructions when they make the POA. A recent US study explored financial decision-making in families where a parent or other relative had dementia. Those who took on financial management stressed ‘how important communication with their loved ones was to the planning process, particularly before the disease progressed to the point that the individual was unable to make decisions for him or herself’.[31]

When courts and tribunals hear allegations of POA abuse, attorneys often argue that the cognitively impaired older relative would approve of the way that their assets are being used.[32] Instead of after-the-fact claims that cannot be corroborated by the principal, it is preferable to encourage clients, when they have capacity, to discuss and document acceptable future uses of their assets.

Consider referrals for training and supports for attorneys

Some people who take on financial management for an older parent or relative report that ‘the shift was monumental and they felt themselves burdened by a whole host of new financial responsibilities that they struggled to manage’.[33] Without adequate knowledge and skills, it is not surprising that even well-intentioned attorneys can misuse the POA role. Older clients and their attorneys may benefit from referrals to community training and support programs on topics such as financial literacy and family dementia care.

CONCLUSION

POA arrangements can and do go wrong. However, lawyers are well-placed to assist their older clients in making better attorney appointments, providing education on the role and its responsibilities, and making referrals to community resources that can empower clients, their attorneys and other family members to prepare for and manage future challenges that may come with declining health.

Nola M Ries is Associate Professor and Member, Law | Health | Justice Research Centre, Faculty of Law, University of Technology Sydney. She currently leads a NSW Government-funded research project on improving elder abuse detection and response by legal, medical and aged care professionals. EMAIL nola.ries@uts.edu.au.


[1] S Jeong et al, ‘“Planning Ahead” among Community-Dwelling Older People from Culturally and Linguistically Diverse Background: A Cross-Sectional Survey’, Journal of Clinical Nursing, Vol. 24, 2015, 244.

[2] Australian Law Reform Commission, Elder Abuse – A National Legal Response: Final Report (Report No. 131, 2017) <https://www.alrc.gov.au/sites/default/files/pdfs/publications/elder_abuse_131_final_report_31_may_2017.pdf> (ALRC); Parliament of New South Wales, General Purpose Standing Committee No. 2, Elder Abuse in New South Wales (Sydney: Legislative Council, June 2016) <www.parliament.nsw.gov.au/committees/inquiries/Pages/inquiry-details.aspx?pk=2387#tab-reports> (NSW inquiry).

[3] See, for example, Law Reform Committee, Parliament of Victoria, Inquiry into Powers of Attorney: Final Report (August 2010) <https://www.parliament.vic.gov.au/images/stories/committees/lawrefrom/powers_of_attorney/Report_24-08-2010.pdf>.

[4] Budget 2018-2019, Safeguarding Quality and Rights – Factsheet 5, <https://budget.gov.au/2018-19/content/factsheets/5-safeguarding-quality-rights.html>.

[5] P R Baker et al, ‘Interventions for Preventing Abuse in the Elderly’, Cochrane Database of Systematic Reviews, Vol. 28, No. 3, 2016, 134.

[6] Law Commission of Ontario, Legal Capacity, Decision-making and Guardianship – Final Report (Toronto: Law Commission of Ontario, 2017) 177.

[7] G Lowndes et al, Financial Abuse of Elders: A Review of the Evidence (Protecting Elders’ Assets Study, Monash University: Melbourne, 2009) 31 <https://www.eapu.com.au/uploads/research_resources/VIC-Financial_Elder_Abuse_Evidence_Review_JUN_209-Monash.pdf>.

[8] G Dalley et al, Financial Abuse of People Lacking Mental Capacity: A Report to the Dawes Trust (2017) 94, <http://bura.brunel.ac.uk/bitstream/2438/15255/1/Fulltext.pdf> .

[9] K A Roberto and P B Teaster, ‘Theorizing Elder Abuse’ in XQ Dong (ed) Elder Abuse: Research, Practice and Policy (Springer, 2017) 21-41.

[10] A L McCawley et al, ‘Access to Assets: Older People with Impaired Capacity and Financial Abuse’, Journal of Adult Protection, Vol. 8, No. 1, 2006, 20.

[11] C Cross, K Purser and T Cockburn, Examining Access to Justice for Those with an Enduring Power of Attorney (POA) Who Are Suffering Financial Abuse (2016) <https://adaaustralia.com.au/wp-content/uploads/2016/07/Access-to-Justice-EPOA-Project-Report-QUT.pdf>.

[12] See above note 8.

[13] C Tilse et al, ‘Enduring Powers of Attorney: Promoting Attorneys' Accountability as Substitute Decision Makers’, Australasian Journal on Ageing, Vol. 33, No. 3, 2014, 193.

[14] J Wainer et al, Diversity and Financial Elder Abuse in Victoria (Protecting Elders’ Assets Study, Monash University: Melbourne, 2011) <https://www.eapu.com.au/uploads/research_resources/VIC-Diversity_and_Financial_Elder_Abuse_FEB_2011-Monash.pdf>.

[15] V Vincenti, et al, ‘Clues to the Power of Attorney-Based Elder Financial Abuse within the Family System’, Journal of Consumer Education, Vol. 30, 2013-2014, 45; A Betz-Hamilton and V Vincenti, ‘Risk Factors Within Families Associated with Elder Financial Exploitation by Relatives with Powers of Attorney’, Journal of Family & Consumer Sciences, Vol. 110, No. 1, 2018, 19.

[16] B A Steinman et al, ‘Risk and Protective Factors for Elder Financial Exploitation by Family Power of Attorney Agents’, Innovation in Aging, Vol. 1, No. 1, 2017, 365.

[17] ALRC, above note 2, 160.

[18] M Clare, B Blundell and J Clare, Examination of the Extent of Elder Abuse in Western Australia: A Qualitative and Quantitative Investigation of Existing Agency Policy, Service Responses and Recorded Data (2011) <http://www.law.uwa.edu.au/__data/assets/pdf_file/0008/2129606/2011-Examination-of-the-Extent-of-Elder-Abuse-in-Western-Australia.pdf> .

[19] See above note 11, 56.

[20] A Rowe, ‘Overseeing Durable Power of Attorney in Iowa: Discouraging Abuse, Honoring Principals’, Drake Law Review, Vol. 63, No. 4, 2015, 1201 at 1209.

[21] D Bagshaw et al, ‘Financial Abuse of Older People by Family Members: Views and Experiences of Older Australians and their Family Members’, Australian Social Work, Vol. 66, No. 1, 2013, 86.

[22] M Johannesen and D LoGiudice, ‘Elder Abuse: A Systematic Review of Risk Factors in Community-Dwelling Elders’, Age and Ageing, Vol. 42, No. 30, 2013, 292.

[23] NSW inquiry, above note 2, 356.

[24] N Ries, ‘Elder Abuse and Lawyers’ Ethical Responsibilities: Incorporating Screening into Practice’, Legal Ethics (published online 28 July 2018) <https://doi.org/10.1080/1460728x.2018.1502965>. Also see, for example, NSW Elder Abuse Helpline and Resource Unit, ‘Identifying Elder Abuse Types and Signs’, <http://www.elderabusehelpline.com.au/for-professionals/identifying-elder-abuse-types-signs> .

[25] For guidance on responding to abuse, see, for example, NSW Elder Abuse Helpline and Resource Unit, <http://www.elderabusehelpline.com.au/for-professionals/responding-to-elder-abuse> .

[26] P J Liu et al, ‘The Role of Social Support in Elder Financial Exploitation Using a Community Sample’, Innovation in Aging, Vol. 1, No. 1, 2017, 395.

[27] Office of the Public Advocate, Your Voice – Trust Your Choice (2017) <http://www.publicadvocate.vic.gov.au/our-services/publications-forms/enduring-powers-of-attorney/enduring-power-of-attorney-publications/413-your-voice-trust-your-choice> .

[28] J McMillan, ‘Making Enduring Powers of Attorney: Practical Tips’, Law Society Journal, Vol. 35, 2017, 80.

[29] S L Britt, ‘The Intergenerational Transference of Money Attitudes and Behaviors’, Journal of Consumer Affairs, Vol. 50, No. 3, 2016, 539 at 549.

[30] Ibid, 543.

[31] O DaDalt et al, ‘Dementia and Financial Incapacity: A Caregiver Study’, Working with Older People, Vol. 20, No. 2, 2016, 66 at 69.

[32] See, for example, McCawley et al, above note 10.

[33] See above note 31, 68.


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