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The legal authority to sign someone else’s name can lead people to do terrible things.

A man with power of attorney removes his elderly aunt from an assisted-living facility, leaves her at home unattended and spends her money.

A nursing home resident with dementia gives power of attorney to a stranger, who pays herself generously from the resident’s funds.

A terminally ill man gives his mother power of attorney and in her son’s final days, she changes the beneficiaries on his pension plan.

Power of attorney can be an easy-to-use tool to allow friends, family and clergy to take care of financial matters for the elderly, deployed military personnel and others.

But it can just as easily be used to exploit those people, when trust is placed in the wrong hands. Unlike conservatorships, which are court-appointed and supervised, powers of attorney come with little oversight and may be granted in minutes using a form downloaded from the Internet.

Abuse “is rampant and we really are seeing a huge increase” in incidents, according to Tara Patet, a prosecutor in the office of the St. Paul City Attorney.

Thanks to efforts by a vulnerable-adult advocacy group, a law passed in April requires those given power of attorney to keep careful records of where money goes, provide an accounting if requested and face liability if they abuse that power.

The form that grants power of attorney will soon reflect those changes. Part of the law goes into effect next month with the rest implemented in January.

‘Speed bumps’ installed

The standard power of attorney form will now have cautionary language that the granter will have to sign off on. “There are touchy issues where people ought to kind of reach a speed bump and make an affirmative decision,” said Iris Freeman, an advocate for seniors and member of the Vulnerable Adult Justice Project (VAJP).

One of those “touchy issues” is referred to as self-gifting, whereby attorneys-in-fact, the people granted power of attorney, take money from the other person’s funds for themselves or their children.

The old form simply allowed the granter to designate whether attorneys-in-fact could self-gift, with virtually no restrictions. Now the granter must check a box and write the names of the people allowed to self-gift.

“We intend that to be helpful in averting those kinds of self-gifting excesses that have been a problem,” Freeman said.

The new form also lists a maximum amount of gift equal to the federal annual gift tax exclusion.

“The more information the attorney-in-fact knows, the less chance the power of attorney will be used incorrectly,” said Laura Garbe, a Minneapolis lawyer with Erickson & Wessman, P.A. and co-chair of the VAJP committee that proposed the changes.

The form’s new language also makes “much clearer statements of the duties that are being granted to the attorney-in-fact,” Freeman said. For instance, the law says they must “act with the interests of the [granter] utmost in mind ... [and] exercise the power in the same manner as an ordinarily prudent person of discretion and intelligence would exercise in the management of the person’s own affairs.”

A third change requires attorneys-in-fact to keep detailed records and, if the granter asks, provide the records to the granter or another person on a periodic basis.

The provision of the bill that will go into effect Aug. 1 allows the granter or an authorized person to recover reasonable attorney fees and costs in the event an attorney-in-fact fails to provide an accounting.

A push nationwide

With the change in law, Minnesota joins a number of other states that have strengthened power of attorney legislation.

In 2006, prompted by widespread abuse, a group of lawyers appointed by state governments to find ways of making laws more consistent across states adopted a model power of attorney reform bill.

Since then, Minnesota is among the states that have adopted at least some of the group’s recommendations.

The amended law “is a big step in the right direction but there’s a lot more work that needs to be done,” Patet said.

Advocates recognized the need to strike a balance. “The power of attorney is a very flexible tool, and we did not want to take away flexibility but we also wanted to add some protections in there,” Garbe said.

Not just a civil matter

For every one case of elder abuse reported, 24 go unreported, according to a 2011 study conducted by Cornell University and others. Victims rarely speak up.

Many power of attorney abuses involve an elderly victim. In those and other vulnerable-adult cases, an attorney-in-fact could be charged criminally for financial exploitation.

The loss is often large enough that the person is charged with a felony. “We don’t get these cases until there’s tens of thousands or hundreds of thousands of dollars of loss. Because of the nature of these victims and the fact that they’re isolated,” Patet said.

“I do think that the additional safeguards with the new legislation are going to help us in prosecuting these kinds of crimes,” Patet said.

“You have a document now that outlines for this person, here’s what your obligations were under this power of attorney. You were on notice of it because it was right here in this document that you signed,” she said.

Jane Friedmann • 612-673-7852