Enduring, or continuous, power of attorney, an arrangement in which your client gives another person authority to make decisions when your client can no longer do so, will become increasingly important in coming years, says Roger McMillan, an estate planner and president of McMillan Financial in Toronto and chairman of Advocis.

“Soon, one-quarter of Canadians will be over age 65,” he says, “destined for a long old age but not -necessarily fiscally capable.”

But there is potential for fraud in every POA arrangement. Your client should give careful consideration to whom powers for personal care and financial matters are given. In the hands of someone untrustworthy, your client could be victimized at a vulnerable time of life.

Craig Hannaford, retired head of the RCMP’s commercial crime unit, told a seminar in Toronto in March (Fraud Awareness Month) sponsored by Canada’s Association for the Fifty Plus that POA fraud is a growing problem. Hannaford discussed a case he investigated in Winnipeg in which the distant nephew of an elderly man in a nursing home befriended the man, managed to get his POA and then depleted the uncle’s accounts. “But it sometimes can be very difficult to build a case,” said Hannaford, who will host a new show, Fraud Squad TV, on Toronto’s Citytv this fall.

Theft by a person holding a POA is a crime under Section 331 of the Canadian Criminal Code, although charges are usually laid under more general theft and fraud provisions. Seniors, however, are very reluctant to report crimes against them. Statistics Canada’s Seniors as Victims of Crime report released in March estimates only half of the crimes against seniors are reported to police.

Margaret Hall, founding director of the Canadian Centre for Elder Law Studies at the British Columbia Law Institute and assistant professor in the faculty of law at the University of British Columbia, believes the relatively small number of charges that have been made against people who hold POAs for seniors stems from the unclear line between misuse and abuse.

“Misuse is by a person who doesn’t understand the duties he or she owes the senior,” Hall says. “An adult daughter may not understand that what she is doing is a crime. She thinks Mom would want her to have that $25,000 to pay off her mortgage. In some situations, there may be a lot of family money and Mom may not miss it. But, in other cases, taking these funds means Mom will be living in poverty.”

POA fraud is often not reported, says Penny Bain, executive director of the British Columbia Coalition to Eliminate Abuse of Seniors, because the senior initially gave the POA to a person he or she trusted and is reluctant to break that relationship.

“A lot of older adults are isolated and may be quite dependent on this person, afraid that if they lose this person’s help they will have to go into a care facility,” she adds. “And if there is physical abuse involved, the senior will fear more violence.”

Lonely seniors may give POAs to what Bain calls “new best friends.” When a person is vulnerable, she says, the predators move in: “You sometimes see this with elderly widowers. A housekeeper moves in, and suddenly the household expenses go up dramatically.”

A change in your client’s standard of living — either above or far below his or her means — is an indicator of financial abuse. You may also notice overdue bills or unusual activity in bank accounts.

After you have documented evidence that appears to point to financial abuse, what do you do? You will want to consult with other professionals who work with your client, such as doctors and lawyers. If action has to be taken, how you proceed will depend on the province in which you live. In British Columbia and Ontario, for example, concerns should be directed to the office of the Public Guardian and Trustee. It will freeze your client’s assets and carry out an investigation. But in Alberta, a concerned party has to apply for a court order to terminate an enduring POA, which can be costly and time-consuming.

A financial advisor has to be extremely careful in making this kind of move, cautions Wayne Taylor, president of Taylor Financial in Edmonton and executive director of the Canadian Association of Pre-retirement Planners: “I’d be afraid of offending the client, and there is also the possibility of liability.”

@page_break@Prevention is the best cure, he adds: “Although POAs can be revoked, the damage has often been done by that time.”

When you discuss assigning POAs with clients, you should emphasize the importance of giving a lot of thought to the person being considered. For example, clients should be cautioned against selecting their eldest son just because he is the eldest male child.

In most cases, McMillan says, an adult child, other relative or trusted friend usually will do a good job as POA. “But the word ‘power’ is the essence of POA agreements,” he says. “If you think a person has a tendency toward power, that’s the wrong person to appoint.”

One solution, he says, is to appoint joint POAs: “The problem with two is that if they disagree, there’s no tiebreaker. If you appoint more than one, you’ll need three.”

And make sure all POAs live near your client, Taylor adds: “This role involves a lot of running around between your client and banks and other financial institutions.”

Appointing a neutral party, such as lawyer or a trust company official, in addition to a family member is another solution. “But remember you will have to pay that outside person,” Taylor says. “Fees vary from province to province; in Ontario, it’s 3% of the estate.”

Most provinces don’t require POA documents to be drawn up by a lawyer, but both Taylor and McMillan highly recommend legal advice. “A lawyer may be able to help your client with things he hasn’t considered,” says McMillan. “Maybe he should be considering setting up an alter-ego trust, which is designed for situations of mental incapacity, instead of a POA.”

And a lawyer will help your client set up the agreement correctly. “If you do it the wrong way, it may be void,” Taylor says. “For instance, if you don’t have it witnessed or if the person who is being named POA is a witness, the document will be void.”

A lawyer may also provide your client with advice about incorporating limitations into the POA agreement. It can be drafted in such a way, for example, that it comes into effect only when the donor has become sufficiently disabled. It can also limit the person assigned POA to perform only certain functions, and require consultation with family members and/or financial advisors before making other decisions. It can require your client’s POA to give priority to certain people in making loans or gifts on your client’s behalf. And it can specify how disagreements will be resolved if there is more than one POA. IE