One man's story demonstrates why it is so important to select a responsible and trustworthy person when designating power of attorney. Understanding the details of powers of attorney is also critical.
Knowing he would be unable to take care of his finances during his 10-month prison sentence, this man granted his fiancée power of attorney over his finances. His fiancée did some of the financial tasks he expected she would perform, like paying his bills. However, she did much more with his finances than he anticipated.
She also used his money to pay her bills and make many unnecessary personal purchases. For instance, she spent over $200,000 on vacations, plastic surgery, and home repairs, among other items. In addition, she took money out of his IRA and cashed in bonds and CDs early, incurring penalties. She also opened credit cards in his name and even tried to get a loan for his home.
When the man learned what his fiancée had been doing when he was in prison, he filed "theft, forgery and related criminal charges against her." However, likely to his surprise, the charges were dismissed. A report states that since she had power of attorney, she was able to do all of these things legally.
As this man's case shows, the person authorized by power of attorney to handle one's finances can significantly impact one's financial life. In certain circumstances, naming a power of attorney is a smart decision and may be necessary. However, thinking carefully before designating power of attorney is important and could save time, money, and headaches later on.
Source: PhillyBurbs.com, "Power of Attorney: 'People don't realize the extent of the power they're giving'," Jo Ciavaglia, March 11, 2013