North Carolina law protects disabled adults of any age from abuse, neglect and exploitation. The law states that “any person having reasonable cause to believe that a disabled adult is in need of protective services shall report such information.” Different types of abuse include physical or mental abuse, neglect, or financial exploitation. Financial exploitation includes the illegal or improper use of a disabled or impaired adult’s resources for another person’s profit or advantage. It is this last type of abuse that we concern ourselves with here.
While we often encourage clients to consider executing a Durable Power of Attorney, it is important that they only do so if they have a person or persons who they can trust implicitly to manage finances when the adult becomes incapacitated due to old age or dementia. We encourage clients not to give this power to someone who has their own financial or credit issues, has declared bankruptcy, spends more than he or she can afford, is married to someone who spends too much or has issues with substance abuse. Giving someone the power to manage your money can give rise to a temptation to steal. Many people who are given Power of Attorney succumb to that temptation.
What can you do? Some options include choosing a person to serve as your Attorney-in-Fact who does not have any of the issues set out above. It can also include imposing strict restrictions on gifting from your assets in the actual Power of Attorney document. It can include naming more than one Attorney-in-Fact so you have checks and balances. Finally, you can name an independent third person (a “Protector”) to whom your Attorney-in-Fact must give an accounting regularly and on which the Protector then signs off, if approved. This independent person can be your lawyer, accountant, financial advisor or a trusted family friend who has the capability of properly reviewing an accounting.
Although the law has serious repercussions for those who exploit the elderly, the problem we often find is that by the time the misappropriation is discovered, the money is gone and it is difficult, if not impossible, to recover the assets. We believe proper planning by implementing some of the suggested ideas can minimize the chances that someone will take advantage of you.