HD13 - Financial Abuse of Vulnerable Adults and Durable Power of Attorney


Executive Summary:
Study Charge

House Joint Resolution 84 requests the Virginia Bar Association, with the assistance of the Department of Social Services and the Department for the Aging, to study durable powers of attorney. The resolution specified that the study include:

• the use and potential abuse of durable powers of attorney; and,

• the need for strengthening civil remedies for financial exploitation.

This document was prepared in response to HJR 84 which is provided in Appendix A.

Study Objectives

An assessment of the study request led to the following objectives:

• To review the potential for abuse inherent in the use of powers of attorney;

• To review the extent and nature of known power of attorney abuse in Virginia;

• To assess demographic trends likely to impact future use and potential abuse of powers of attorney;

• To review actions taken in a sample of states to prevent or diminish the incidence of power of attorney abuse; and,

• To review legislative options for strengthening protection to individuals who may be susceptible to durable power of attorney.

Scope of this Study

The study committee focused on the use and potential abuse of durable powers of attorney for this first phase of its response to HJR 84. This report presents that response. HJR 84 also requests the study committee to explore methods for strengthening civil remedies to enhance protection of adults who are vulnerable to financial exploitation. The study committee's work on the second charge is continuing and a subsequent report will be made to the Governor and the General Assembly.

Background

There have been an increasing number of media and anecdotal accounts of abuse of authority by persons entrusted with the control of another's assets through a durable power of attorney. Very frequently durable powers of attorney are held by family members who are given very broad powers under the power of attorney. The extent of the authority given is sometimes related to the agent's position of trust as a family member and at other times it is related to the principal's lack of understanding of the extent and nature of the power being conferred. A growing number of case situations in which older or incapacitated adults are financially victimized are being identified. The known number of occurrences is believed to be only a small representation of the total problem since most occurrences are not reported to authorities and no record is made. The National Aging Resource Center on Elder Abuse estimated, in a national study conducted in 1988, that 20 percent of all victims of elder abuse were financially exploited. (*1)

The elderly are made more vulnerable to financial exploitation by their increased susceptible to certain illnesses (arthritis, hypertension, congestive heart failure, Parkinson's Disease, diabetes, dementia). They are also more likely than other segments of the population to sustain permanent disability as a result of falls and fractures. Any decrease in physical ability or mental capacity increases vulnerability to victimization.

A relatively small percentage of those who are victims of financial exploitation are victimized by a person holding their power of attorney. In 1993 the Virginia Department of Social Services examined 543 cases in which financial exploitation was substantiated by an adult protective services investigation. In 11% of those cases, the vulnerable adults were victimized by persons holding guardianships or powers of attorney.

In fiscal years 1993 and 1994, in Virginia, 543 and 637 cases respectively, were substantiated by local departments of social services through adult protective services (APS) investigations. (*2) The impact at financial exploitation can be both immediate and severe. With most of their earning capacity behind them, older victims find it impossible to regain lost resources and the results are often permanently devastating. (*3)

Approach and Methodology

Responsibility for conducting the study was delegated by the General Assembly through House Joint Resolution 84 to the Virginia Bar Association. To assist with the study, the Virginia Bar Association formed a study committee composed of members of the bar.

Staff support for the study was provided by the Virginia Departments of Social Services and Aging. Refer to the Acknowledgements for a complete listing of members.

Approaches used to respond to the study objectives included: a review of statistical information relative to the prevalence and nature of financial exploitation cases substantiated through adult protective services investigations in Virginia for fiscal years 1993 and 1994; testimony from witnesses with direct experience with financial exploitation; committee review of a national study on the abuse of the durable power of attorney conducted by the Government Law Center of Albany Law School published in March, 1994; review of applicable law; and research and personal experience of committee members.

Organization of this Report

This report is organized into five chapters. Chapter II is a review of a demographic trend toward an older population and the implication that has for greater numbers of victims. This chapter also examines the increase in the known number of financial exploitation victims in Virginia during the past several years. Chapter III describes the purposes of the durable power of attorney, its value and its potential for abuse. This chapter also provides a brief review of responses taken by selected states. Chapter IV provides an overview of a recent national study of this topic. Chapter V presents conclusions and outlines recommendations of this study committee.
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(*1) Tatara, Toshio. Ph.D., testimony given on behalf of the National Aging Resource Center on Elder Abuse before Subcommittee on Health and Long-Term Care, Select Committee on Aging, U.S. House of Representatives. May 1, 1990. Reported in "Elder Abuse: Questions and Answers. NARCEA. 1990, Wash. D.C., page 6.
(*2) Virginia Department of Social Services, "Adult Protective Services Annual Statistical Report, State Fiscal Year 1993" and "Adult Protective Services Annual Statistical Report, State Fiscal Year 1994."
(*3) Blunt, A. Paul. 'Financial Exploitation of the Incapacitated: Investigation and
Remedies.' "Journal of Elder Abuse & Neglect," Volume 5, Number 1, 1993, p. 19.