New Legal Protections for the Elderly

Misappropriation of an elderly person's assets by someone legally authorized to oversee them may now be a lot tougher to pull off in the State of New York. New legislation that went into effect Sept. 1 — in the form of a radically changed power-of-attorney (POA) document — couldn't have come at a better time. "Financial abuse is one of the fastest growing areas of elder abuse," says Andrea Lowenthal, an elder-law and estate-planning attorney in New York. "Older people are a growing segment of society and are among the most vulnerable, often because of their misplaced trust." But if seniors are the prey, then they often choose their predators — people they've empowered to act on their behalf, as agents, in financial matters, though a POA. (Watch TIME's video "Seniors Say End-of-Life Care Matters.")

To be granted the rights associated with a POA was pretty uncomplicated under the old document. Only one signature was required — that of the principal assigning POA to the agent. In some cases, the agent — usually an offspring — didn't even know he or she had been named in the document until the principal became unable to take care of day-to-day financial affairs. Such secrecy generally led to confusion down the road, with the appointee often woefully ignorant of the principal's state of affairs. In other instances, a health-care aide or housekeeper with ulterior motives might procure a POA and persuade a gullible senior to sign it. The signature of the principal was basically all that mattered then.

Now things are different.

"The new power of attorney has teeth," says Ronald Fatoullah, an elder-law and estate-planning attorney in New York. One safeguard is a multiplicity of signatures. Now both the principal and the agent must sign the POA, and each signature must be notarized. "This is a big change," he says. "The document specifically states that when you accept the authority to act as agent, you create a special fiduciary relationship with the principal that imposes legal responsibilities until you resign or the power of attorney is terminated." (Read "The Real Issues of End-of-Life Care.")

Another important provision of the statute is the right of the principal to appoint a monitor, like a trusted accountant, to oversee the activities of an inexperienced agent, or a family member to ensure that an agent acts according to the principal's wishes. Those who have POA must now keep records and account for every penny, which was not a requirement under the previous law, says Louis Pierro, an elder-law and estate-planning attorney in New York, adding, "The new law makes it easier to bring a civil suit against an agent who has acted inappropriately."

The new law goes even further when addressing gift-giving. In the past, it was relatively easy for people expecting to be named as agents to slip into the POA a self-serving gift-giving provision. Because these write-ins would often be overlooked by the principal, it was possible for agents to write checks to benefit themselves and clean out a principal's bank account. Now such doings will be harder to get away with. If the principal wants to grant the agent the specific power to make gifts, the principal must initial a box on the POA authorization form, and then describe the types of gifts on a separate statutory major-gifts rider. The rider must contain the signature of the principal and two witnesses and also be notarized.

The new rider is unique to New York, notes Pierro. "Having the obligations spelled out makes the person acting under power of attorney subject to virtually the same rules as someone who operates as a trustee," he says. Might other states adopt the rider? "They'll likely wait and see New York's experience with it," he says.

See pictures of the business of granny care.