Preventing Financial Elder Abuse.

Banks and Credit Unions are required to report both known and reasonably suspected cases of financial elder abuse, when such cases present themselves within the scope of banking activities (section 15630.1 of its Welfare and Institutions Code). Reports are made either to Law Enforcement or Adult Protective Services immediately, or as soon as possible. California Legislature recently amended the same law to allow Banks and Credit Unions the right to refuse to honor a power of attorney to prevent Financial Elder Abuse involving elders and dependent adults.

Powers of Attorney are important legal instruments that can be used properly to manage the financial, property and legal affairs of a person in their best interests when that person later becomes incapacitated. An adult who has legal capacity — i.e., understands the significance of the Power of Attorney and appreciates the rights, risks and alternatives involved — can authorize an Agent to manage their finances.  A Power of Attorney can, therefore, be used to avoid going to court to manage a person’s assets and affairs when that person later becomes incapacitated.

Unfortunately, Powers of Attorney are sometimes obtained in wrongful circumstances (such as when the person lacks capacity or is being coerced) and can also sometimes be misused to embezzle money from the elder’s or dependent adult’s financial accounts.

Now, a Bank or Credit Union may refuse to honor the Power of Attorney of an elder or dependent adult where they either know or suspect elder abuse. They already have discretion whether or not to honor a Power of Attorney when the elder, or someone else, tells them elder abuse is occurring if the bank has neither any corroborating evidence showing elder abuse nor has a reasonable belief that, under the facts and circumstances, elder abuse is occurring.

Any alternative agents who are named in the Power of Attorney can still use the Power of Attorney if they are not themselves known or suspected of elder abuse. The named alternative agents may be trustworthy persons who would act in the best interests of the elder or dependent adult and should be allowed to do so.

If an Agent believes that their authority was wrongly dishonored by a Bank or Credit Union then the Agent can petition the Court to enforce the power of attorney. The Court can award attorney fees to be paid by the Bank to the attorney in fact. Clearly, Banks and Credit Unions have an incentive to act responsibility under the circumstances.

The foregoing legislative amendment is a fine tuning of California’s existing statutory laws regarding financial elder abuse. It is specifically drafted to prevent financial abuse of its elders and dependent adults when their Powers of Attorney and banking activities are concerned.