Wednesday, September 05, 2007

Final "Courting Trouble" Article on POA Abuse

The fourth & final article by Dennis B. Roddy, in the series "Courting Trouble", regarding potential abuse under powers of attorney, was published on September 4, 2007, in the Pittsburgh Post-Gazette. It was entitled "Courting Trouble: Power of attorney safeguards tough to legislate".

The photo (copied above) that accompanied the article was taken by Dennis, with our permission, in my office during the document signing that he described.

I talked with Mrs. Hileman this afternoon. She is thrilled to be a "media star" -- even for one brief moment -- at her age.

With permission granted by the author (but with continuing rights retained by PPG as to any further reproduction), I now repost that final article in the series.

When the moment came for Myrna Joyce Hileman to sign her name on a raft of papers that could spell the difference between a secure old age and lonely ruin, her lawyer paused for a warning.

"These are not simple documents," said Neil Hendershot. "People think 'Oh, I'm going to go fill out a power of attorney,' but they don't really know what they're doing."

Mrs. Hileman, 78, leaned slightly in her wheelchair and motioned to her daughter, Bonita.

"I trust my daughter with my life," she said. "I know a lot of people say they know their daughter and then they turn against them and they take the estate and all. But she wouldn't."

With that, she put her signature to a will, a set of medical directives, and a durable power of attorney that permits Bonita to buy, sell, invest, divest, change insurance forms -- to do the things Mrs. Hileman would do for herself -- or to herself, if she chose unwisely.

She's counting on Bonita to choose wisely.

"There's family members I would not give power of attorney to," Mrs. Hileman said.

The signing in Mr. Hendershot's Harrisburg offices this summer took place after hours of interviews with Mrs. Hileman and her family, visits to the office, and customized writing. He's counting on his judgment and Mrs. Hileman's.

The odds in this case are good that Myrna Hileman won't join the ranks of people misled or badly served by their agents. When that happens, it can spell disaster to victims who have given people they trust a license to steal.

And there is no easy solution.

"We can't protect someone who picks the wrong agent," said John P. Burton, the Santa Fe, N.M., lawyer who chaired the committee that put forward proposed changes in the law.

Doing something about the problem once it arises, though, is what Mr. Burton and his committee aimed to accomplish. They had to contend with 50 state laws -- some detailed, some vague.

The laws governing durable powers of attorney are as varied as the states in which they are enacted.

In some, agents given the power to handle the affairs of others can dispense property and alter inheritances with little regulation. In others, an agent has to carefully justify each move.

Somewhere in the middle lies Pennsylvania. Here, an agent acting under power of attorney is severely limited in the dispensing of gifts. That restriction was added after lawyers discovered a troubling revision that had been inserted in Pennsylvania's power of attorney statute in 1992. It inexplicably opened the door to unlimited gift-giving, even allowing an agent to make gifts to himself.

No expert interviewed could account for how the provision found its way in before it was rectified in 1998. But some doors remain dangerously open.

Changing the beneficiary on an insurance form or pension plan is as simple as filing the documents -- and therein, say critics, lies the largest gap through which agents can divert the largest portions of a person's estate without their agreement or even knowledge.

"That is a huge hole and it's where the money is," said Mr. Hendershot. "I've stayed quiet about this because I don't want to publicly tell people how to screw the elderly. But it sounds like the road map might already have been discovered by some travelers."

Change has come slowly. Last year, a committee from the National Conference of Commissioners on Uniform State Laws drafted a model statute for powers of attorney. It closed the gaps on pension and insurance changes, requiring express authority in the document to change beneficiaries. It opens the door to any third party to challenge the actions of an agent under power of attorney if the person believes the agent is not acting in the best interest of the person he is representing.

"Any person who demonstrates sufficient interest in the principal's welfare may petition the court for review of the agent's conduct," explains Linda S. Whitton, a law professor at Valparaiso University who helped draft the new statute.

Mr. Burton, the committee's chairman, said opening the system to appeals by worried outsiders was an important reform proposed in the law. Nine other states already permitted it. Pennsylvania isn't one.

Rather, in Pennsylvania, the ordinary route has been to file on behalf of the principal, oftentimes while seeking the court appointment of a guardian to oversee the person's affairs.

Under the proposed reforms, third parties would be permitted to make their case before a judge and ask for a court review of the agent's conduct when they suspect something is amiss.

Already, lawyers can make that argument under "common law" -- the body of judicial precedents that sometimes serve as a guideline on how to proceed when the statute says nothing.

"It's very hard to find and it's very hard to present to judges if it's just in case law," said Mr. Burton. "We put it into the statute where it's easy for lawyers to find and it's easy therefore for lawyers to show to judges."

To date, only one state, New Mexico, has adopted the recommended new act. Eight are considering adoption. Nine other states already permit a wide array of third parties to intervene. Pennsylvania is not one of them.

"There's no question that there is a class of persons who are vulnerable. The question is what do you do about it?" said John Lombard, a leading estates and trust attorney in Philadelphia.

Mr. Lombard, who chaired the committee that oversaw revisions in Pennsylvania's power of attorney statute a decade ago, worries that the proposed model law adopted by the national commission goes too far.

He has argued vehemently against widening the statute to make it easier for outsiders to intervene, saying it intrudes on client privacy and could deter people from taking the role of agent under a power of attorney if they thought they might be subject to meddlesome outsiders demanding an account.

"You're not going to legislate goodness. There is always going to be some guy who will try to beat the system," Mr. Lombard said.

To Dr. Whitton, who has pushed hard for the revised statute, Mr. Lombard's arguments seem specious.

"The deterrent to somebody bringing a frivolous action is that when you file a lawsuit, you're going to have to pay those fees. I don't think the average person launches a lawsuit just for the heck of it," she said. "Even without this provision, people for whom money is no object can challenge an agent's conduct by asking a judge to appoint a guardian."

The extent of Mr. Lombard's influence in legal circles is impressive, as is his client list. He is the co-author of a definitive text on powers of attorney. Thus, his opposition to the proposed revised statute is taken seriously by the legal community and the Legislature that looks to it for guidance.

The protection-vs.-privacy aspect of the argument is likely to play out along class lines as well as constitutional ones.

"You ask Jack [Lombard] about Jack's clients," said Mr. Hendershot. "What the average net worth of his clients might be. My guess is they're in excess of a million. Maybe two million. We're talking here about people I have here that are under $500,000."

Mr. Hendershot worries about clients being cheated or stolen from. Mr. Lombard's clients are more likely to be worried about taxation, estates and flexibility to move assets to save money.

For Myrna Hileman, the worry is getting things in order as she approaches a time when she might not be able to decide for herself.

As she picked up the power of attorney papers, Mr. Hendershot pointed to a large disclosure, written in boldface type, advising her of the gravity of the document.

"You see this bold language? It's a warning to you. It's a consumer notice. It says this power of attorney is for your benefit and that the agent is governed by the court and you," he said.

"If I hadn't said that to you, would you have read that carefully?" he asked.

"Yes," Mrs. Hileman insisted.

"Then you're good clients," Mr. Hendershot replied. "But a lot of people would just say 'show me where to sign.'"

In growing numbers, the clients who simply signed are risking catastrophe at the hands of their benefactors.