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Get a Power of Attorney (But Make Sure It’s Not a License to Steal)

Many of us understand that saving for retirement and for the long term is one of the most important actions you can take to ensure a secure future. So is protecting that savings.

One in five older adults fall victim to some form of financial exploitation. Sometimes the loss is minor, but sometimes it can be disastrous. In a single case, the average victim loses $120,000, which is roughly the average amount of a 50-year-old’s entire retirement savings.

AARP understands the importance of preventing financial exploitation. Our groundbreaking BankSafe program works with the financial services industry to develop new ways to fight financial exploitation.

Yet the greatest power lies with you — the consumer. You are in the best position to ensure your savings are secure. In a previous blog we covered one important area to consider — alternatives to joint bank accounts. Another key action step is to carefully plan for your future, especially with a power of attorney.

A power of attorney is a legal document in which you give a person, called an agent, the authority to act on your behalf. A power of attorney allows you to plan for situations in which you may not have the ability to manage your finances. With the right power of attorney (emphasis on right — more on that later), a person you trust can protect your savings. And by carefully thinking through your choice, you can avoid inadvertently giving someone else a license to steal when you are unable to manage your finances.

A power of attorney gives someone the authority to perform tasks ranging from paying your bills and buying groceries to selling your home. Giving someone the authority to act on one’s behalf becomes crucial in the event that, say, a person becomes incapacitated or begins to show the first signs of dementia. The only good time to put the proper protections in place, therefore, is before any such life event occurs.


How to find your agent — or agents

Filling the position of power of attorney agent should be done with great care. While each one of us will undoubtedly find ourselves in our own unique situation, here are some general tips to help you meet your power of attorney needs:*

Get two agents. Many people know the importance of a power of attorney, but they don’t know this key detail. Why two agents? First, having two people involved spreads the responsibilities, lightening the financial caregiving burden that can weigh so heavily on one individual. Second, it serves a checks-and-balances function, just as two accountants would manage the account of a single business. The end result: better decision making and increased security of your funds.

In choosing your two agents, make sure they can get along with each other and have similar principles when it comes to money. For instance, perhaps don’t choose the kid who’s prone to overdrafting on a bank account, or the one who’s always borrowing money and never paying you back.

Choose agents you trust. This is the most important aspect of finding the right agents. Quite simply, not choosing someone you completely trust puts your money at risk. Naming an untrustworthy agent amounts to awarding a license to steal. In your assessment of prospective agents, you need to ask yourself some direct questions and give some honest answers. Ask, for instance, why do I trust them?  Would I trust them with my money not just years in the future, but right now? Will they always keep my best interest in mind in every decision, large and small?

Communicate with the people you select — and others. Once you’ve chosen your two agents, set out expectations in an open discussion with them. Make sure they have a copy of the power of attorney document. Finally, let everyone close to you know who has these responsibilities so there’s no confusion in the event you cannot speak for yourself.

Limit the power of the financial power of attorney. The beauty of the power of attorney is that you can design it to meet your precise needs. If you only need the agents to pay bills, then give them that authority alone. Likewise, give them enough power to act on your behalf in the areas you want them to be able to address. Given the flexibility to personally tailor your power of attorney, you will want to steer clear of prewritten power of attorney forms. These can lead to your authorizing a role you hadn’t intended.  Using an elder law or estate planning attorney ensures that the duties of the agent are outlined in the power of attorney. Examples of such duties: The agent can only act in the best interest of the principal, will not commingle funds, and will keep records of all transactions.

Let’s beat exploitation by working together

Through such initiatives as Bank Safe, we’re working hard to fight financial exploitation. But the best way to fight exploitation is for each of us individually to take sound steps to secure our future savings. A carefully developed plan that includes two trusted power of attorney agents is key among those steps.


Debra Whitman is AARP’s chief public policy officer and leads policy development, analysis and research, as well as global thought leadership that supports and advances the interests of individuals age 50-plus and their families. Follow Deb on Twitter: @policydeb

As the director of AARP’s BankSafe Initiative, Jilenne Gunther works on solutions to curb financial exploitation and to engage the financial industry to better protect more of the 50-plus from financial exploitation. Follow Jilenne on Twitter: @Banksafe_



* All information provided by AARP should be treated as a series of helpful planning tips, not legal or financial advice. If you are considering changes in your retirement security strategy, it is important to consult with your preferred legal and financial advisors.

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