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How You Can Make Sure You Have All Your ‘powers’ Intact

Failure to uphold these duties, or any breach of these duties, may constitute power of attorney abuse.

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A large number of issues that happen in the context of NRIs are related to the Power of Attorney (POA). Yet many people still carry a lot of ambiguity in their minds about what this really is.

A POA (Power of attorney) is a lawfully issued instrument that establishes a relationship between two people: The Principal and the Agent or Attorney-in-Fact. The person empowering the other to act is called the principal, grantor, or donor (of the power). The Principal thus assigns or authorizes the Agent to act on his/her behalf. It is a letter of attorney or written authorization to represent or act on Principal's behalf in private affairs, legal matters or in business by the Agent.

The arrangement of POA is typically meant to ensure the fulfillment of the grantor’s wishes and decisions when the principal is not available, incapable or incompetent.

However, such a situation can leave the Principal especially the Indian expatriates living abroad vulnerable to financial abuse because the agreement gives almost limitless authority to the Agent/Attorney over the grantor’s financial matters.

For NRI's it is tough to frequently visit India and go through the notoriously lengthy legal process in the country. In most of the situations, the person on the other side of the railing as an attorney is one’s parents or siblings.

As per the legal authorities, the misuse of power of attorney is quite widespread across India and NRI owners top the list of victims. Many NRIs go through unpleasant experiences where their parents, siblings, or caretakers seize the property through unlawful means. The emigrants are particularly vulnerable to fraudulent elements because of time constraints and lack of legal support.

How can POA be abused?

Power of Attorney abuse transpires when the Agent in the agreement benefits himself by deciding on account of the issuer without the Principal’s knowledge or consent. POA abuse can take many forms, the most common of which is financial abuse.

Financial Abuse

⦁ Most POAs give complete control over the issuer’s finances. Therefore, perpetrators of POA abuse may steal or misappropriate funds from the Principal’s account for individual use while pretending that it will benefit the grantor.

⦁ Any instance of appropriating issuer’s funds for personal profit could constitute financial exploitation. If an agent uses the POA status to make acquisitions, investments, or other financial transactions for his/her benefit instead of the Principal’s, they could be exploiting the power of the document.

Identity Theft, Fraud, and Forgery

⦁ With complete access to the grantor’s accounts and personal information, the agent might purchase annuities, insurance products and open bank accounts, credit cards, in the Principal’s name. Such actions, bordering on identity theft, may hold the issuer culpable for any fraud or illegal conduct perpetrated by the representative under the guise of the grantor.

⦁ Furthermore, the agent may carry out welfare fraud or tax evasion using the name and personal information of the grantor, thus expanding the gain of the representative.

⦁ Another case of fraud and forgery would be the act of changing the Principal’s estate or beneficiary designations to benefit the agent without the consent and against the wishes of the issuer.

Breach of Fiduciary Duty

Anyone granted POA is liable to the fiduciary obligation to the Principal. Fiduciary functions are not limited. They comprise:

⦁Keeping the grantor informed about the status and any changes to his/her finances, and other accounts or information covered by the agreement;

⦁Receiving consent from the issuer before drawing any profit from the principal’s accounts or investments;

⦁Maintaining and acting according to the principal's interests at all times; and

⦁Abstaining from transferring the property of the principal without his consent.

Failure to uphold these duties, or any breach of these duties, may constitute power of attorney abuse.

Signs of abuse of Power-of-Attorney

As listed above, Power of Attorney abuse can manifest itself in several ways. The potential symptoms and evidence of abuse are:

⦁An abrupt and obscure change in the finances of the grantor.

⦁Secrecy or reluctance to communicate with the Principal.

⦁Refusal/reluctance by Agents to share financial information or records.

⦁Signs that the representative is making decisions on behalf of the grantor without consulting or gaining his consent.

What to do to prevent Power of Attorney abuse?

⦁The Representative to whom the powers are granted must be a close and trusted individual – who will make decisions as per your needs and wishes.

⦁Never give this document to a stranger.

⦁Keep trusted family members, advisors and friends informed about who has POA and its status.

⦁Keep an access and control to all financial and personal records, and follow-up frequently to make sure no sudden or unauthorized changes are made.

⦁Retain the right to take back the document under any circumstance, and do not release the document unless it’s necessary.

⦁Be very cautious about signing any durable POA, as it typically gives the agent total or near-complete power over your matters.

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