Power of attorney and scams: what families should know

What a power of attorney is

The CFPB describes a power of attorney as "a legal document" in which a person (the principal) gives someone else (the agent) authority over their money and property. The agent is sometimes called an attorney-in-fact.

A durable power of attorney stays in effect if your parent later loses the ability to make decisions, as the Alzheimer's Association explains. That is usually the point of signing one. A separate health care power of attorney covers medical decisions.

How a power of attorney can help against scams

• An agent can act fast. If your parent can no longer manage money, the agent can deal with the bank, cancel cards and handle bills, within the powers the document grants.
• It avoids court later. Without one, a family may have to ask a court for guardianship or conservatorship. The Alzheimer's Association describes guardianship as a step usually taken when no plan is in place.
• It sets expectations early. Talking about it opens a calm conversation about who your parent trusts, before a crisis.

What a power of attorney does not do

• It doesn't take control from your parent. The CFPB and SEC note that people can keep managing their own money "as long as you have the ability to make decisions." A parent with capacity can still send money to a scammer.
• It doesn't cover Social Security. SSA says the Treasury "does not recognize power of attorney for negotiating federal payments." You must apply to be a representative payee.
• It isn't a trusted contact. A trusted contact at a bank or brokerage is a lighter step. FINRA says it does not make that person a power of attorney.
• It may not be accepted everywhere right away. Some banks and brokerages have their own forms or review steps. Ask each one before you need it.

The four duties of an agent

The CFPB's guide for agents, written with the American Bar Association's Commission on Law and Aging, lists four duties. If you become the agent, these are your job:

1. Act only in your parent's best interest

   Put their interests ahead of your own, and avoid conflicts of interest.

2. Manage their money carefully

   Use good judgment. The CFPB says to be more careful with their money than with your own.

3. Keep their money separate

   Keep it apart from yours and anyone else's. Don't move it into joint or personal accounts without legal advice.

4. Keep good records

   Track everything you receive and spend for them. Sign as agent, for example "Jane Doe, as agent for Robert Doe," never just your parent's name.

When the danger is the agent

A power of attorney gives real power, and it can be misused. The CFPB guide says an agent should not borrow, lend or give the principal's money to themselves or others, and should be cautious even when the document allows gifts. Warning signs of misuse include:

• Unexplained withdrawals, transfers or checks to the agent or their family.
• Your parent's bills going unpaid while money leaves the account.
• The agent refusing to show records or keeping other family away.
• Sudden changes to wills, beneficiaries or property titles.

Questions to ask an elder law attorney

To find local legal help, start with the Eldercare Locator at 1-800-677-1116. If your parent has already lost money, the National Elder Fraud Hotline (1-833-372-8311) can help with next steps.

• Should the power of attorney be durable, and does it take effect now or only on incapacity?
• Which powers should it include, and which should it leave out (such as gifts)?
• Should we name a backup agent? Two agents acting together?
• Will my parent's banks and brokerages accept it, or do they need their own forms?
• How does this work with a will, a living trust, or a representative payee for Social Security?
• How can my parent change or cancel it later?

Scams that target agents and families

The CFPB guide also asks agents to watch for common scams aimed at the person they help, including relative-in-need calls, lottery and sweepstakes offers, fake "official" mail, home improvement pitches and drug plan offers. Its advice is simple: don't share account numbers or passwords unless you know who is asking and why, and "If it sounds too good to be true, it probably is."

As an agent, you will also get more financial email. Fake invoices and "account locked" messages target you too. See how to tell if an email is a scam.

Questions people ask