Stealing from mom and dad

Léony de Graaf, a Burlington, Ont.-based financial adviser, witnessed first hand how lives can be ruined by the unscrupulous use of power of attorney. She received a call from an 82-year-old client who had been forcefully incarcerated in a Hamilton psychiatric ward. “Rose was still capable of handling her affairs, including her own banking,” says de Graaf. “I had a very strong suspicion that her son, who had a power of attorney [POA] for his mother, was trying to have her deemed incompetent so he could take full control of her assets.” She suspected Rose’s son misled the psychiatrist whom he himself had arranged to evaluate his mother, whose family doctor had recently retired.

De Graaf fought to have Rose (not her client’s real name) released from the facility, advocating for her capacities and a reassessment. The medical team relented and allowed Rose to move into a retirement residence. Unfortunately, even after Rose’s release, de Graaf was powerless to stop the son from redirecting his mother’s investment statements to himself, putting her house up for sale, and eventually moving her west, where he lived. “One of the fastest growing crimes against seniors is POA abuse,” says De Graaf, who chairs the local chapter of a group called Seniors and Law Enforcement Together chapter.

Having a senior declared incompetent is a commonly used legal manoeuvre by POA abusers to nullify the senior’s ability to make choices for themselves, including revoking the POA, says Ann Soden, a Montreal lawyer who specializes in elder law and heads the National Institute of Law, Policy and Aging. Sadly, perpetrators of many types of abuse against seniors are often their own children and others they trust. According to the Canadian Centre for Elder Law, the most conservative statistics suggest one in 12 older Canadians are abused or neglected, with the most commonly reported type of abuse being financial.

With the epic shift of Canada’s aging demographics, POA documents will be used increasingly to appoint trusted family members or others to handle financial decision-making in the event of medical or cognitive impairment. Today, approximately 500,000 Canadians are living with Alzheimer’s disease or a related dementia—within a generation this number will more than double to 1.1 million.

Financial abuse by POA can run the gamut from small amounts of money being pilfered from chequing accounts to making off with entire multi-million-dollar estates. Indeed, most standard POA documents grant such absolute power that abusers are often able to rebuff criminal investigation and prosecution by simply telling authorities they were doing what they thought was best or that they didn’t realize they were improperly managing the money.

Many experts are now sounding warnings of an impending flood of POA abuses. “This is a community issue that is going to have massive economic repercussions,” says Harold Geller, a civil litigator with Ottawa-based Doucet McBride LLP. “Regulators, government and to some extent professional organizations have failed to act,” he says. Lynne Butler, a lawyer and will and estate planner at Scotia Private Client Group, adds that one of the reasons POA abuse is rampant is because it’s happening in the shadows. “No one is watching or supervising the POA’s actions.” She says lawyers who specialize in this area have begun beefing up their documents to provide more protection for the clients. “Our current system of powers of attorney is based on an honour system, which really only works for the people who are honourable. Unfortunately, there are too many people who are not.”

There is currently no meaningful oversight over POAs’ actions (especially when that POA is an adult child) and setting up a system would likely cost billions and take years, say experts. But a solution may already exist within the ranks of Canada’s accountants, lawyers, doctors and financial advisers, with the latter possibly being the keystone in a system of checks and balances. Rhonda Latreille, founder and CEO of Age-Friendly Business (which offers courses for Canada’s professionals on a multitude of issues related to aging) says professionals could do so much more to curtail financial abuse if only they had the relevant information and tools and were emboldened to do the right thing.

Experts suggest a few simple ways seniors can protect themselves. They can, for instance, include a clause in a POA document stipulating that a POA is to continue using the same financial adviser (as long as they’re willing and in good professional standing). If the named adviser is unwilling or unable to continue in this role, then a predetermined individual (not the current POA) such as the senior’s accountant or lawyer could be given the mandate to choose an alternative adviser. Furthermore, the financial adviser would still need the POA’s approval for any proposed portfolio transactions.

Butler says she’s already utilizing such a clause. “My clients love the idea because it gives them a sense of control and a real-world check and balance against a self-serving POA,” she says. The financial adviser De Graaf thinks POAs “might think twice” knowing professionals are watching them. She’d like to see seniors extend this clause to include their family doctor or a capacity assessor of their choice to determine their mental incapacity. And as Rose’s case highlights, the adult child should not be the one to order the assessment. (One negative assessment of incapacity could give the adult child or POA full control over everything, including whether or not to consent to future assessments.)

Alan Atkins, president of NetWealth Consulting Inc. in Barrie, Ont., argues if such a clause were included in more POA documents, it could be a game changer. Currently, if advisers don’t follow a POA’s instructions they risk being sued; if they follow instructions and there are losses to the estate because of the actions of a rogue POA they risk being sued by other beneficiaries of the estate claiming the financial adviser did not live up to their fiduciary duty.

Consumers could also empower their professional advisers, including their accountant, lawyer and bank manager, by declaring in writing that they are free to communicate with one another, thus nullifying privacy legislation that can be exploited to muzzle professionals from sharing their suspicions of POA abuse. As Dan McCormick, a certified financial planner with Investors Group, points out, when a team of two or more professionals and institutions all get different red flags, collectively they could share the warning signs with each other and then confront the abuse.