Although I understand this article may strike a nerve with some, this article highlights an ever-growing problem, and what used to be an issue only occasionally, is now becoming a widespread problem not just in Bermuda, but globally.

So, what is this issue?

When someone grants another person power of attorney (POA), and that POA acts in their own best interest rather than yours.

Firstly, it is important to understand both the term “power of attorney” and the responsibility the role carries. Strictly speaking, a POA is a legal document that empowers one person to act on behalf of another in financial, legal or medical matters. Setting up a POA can provide peace of mind because it allows you to name a trusted person who can make decisions if you’re unable to manage your own affairs.

However, it is important to recognise not everyone appointed as your POA will have your best interests at heart. Some might neglect their duties, whereas others might misuse their authority for personal gain or make decisions that harm your wellbeing.

Knowing the potential risks and warning signs is key to protecting yourself when choosing someone to represent you through a POA.

The potential for abuse or exploitation should be your primary concern. Granting someone power of attorney gives them not only access to your finances and personal information, but also decision-making authority.

If the appointed POA has malicious intentions, they can abuse this trust. This might include unauthorised withdrawals, changing ownership on property, misappropriation of funds or even fraud. There are many legal cases where people entrusted with POA have committed theft or exerted undue influence, using assets for their own benefit rather than that of the principal.

This risk increases if the POA is a family member who is struggling financially, a close friend with questionable motives or someone who stands to gain significantly from the principal’s assets.

Beyond outright theft, some with POA may act in ways that are not necessarily criminal but nonetheless damage the principal’s interests. For example, an individual with POA might disregard the principal’s wishes or best interests, making decisions based either on self-interest or favouritism.

This might involve altering estate plans, selling property at undervalued prices or neglecting the principal’s health and welfare. In some cases, such actions stem from a lack of understanding of the principal’s preferences or an outright disregard for their wellbeing.

It’s important to remember that having legal authority does not automatically confer ethical responsibility; some entrusted with POA might prioritise their own convenience or financial gain over the principal’s needs.

Situations in which the motives of the person holding POA are questionable often involve familial conflicts or strained relationships. For instance, a family member who is appointed as POA might see the principal’s assets as an inheritance waiting to be claimed.

In such situations, the POA might pressure or manipulate the principal into making decisions that benefit the POA financially, such as changing a will or selling valuable property at a low price.

These scenarios are not uncommon and underscore the importance of choosing a POA carefully and with full awareness of their character and motives.

Another factor that is important to consider in evaluating trustworthiness of a POA is the potential for undue influence or coercion. Elderly or vulnerable individuals may be susceptible to manipulation by someone they trust or depend on.

A POA might exploit this vulnerability, persuading the principal to make decisions that are not aligned with their true desires. For example, under false pretences, a POA might convince the principal to transfer assets or change legal documents, all while the principal is unaware of the true implications of doing so.

Such manipulation can be subtle but damaging, and it underscores the importance of monitoring the actions of the POA and ensuring that the principal’s autonomy is respected.

Moreover, not all POAs are equally competent in handling their responsibilities. Some may lack the financial literacy or understanding of legal processes necessary to act in the principal’s best interest.

Incompetence can lead to poor decision-making, financial mismanagement or neglect of essential responsibilities including paying bills, managing investments or ensuring proper healthcare.

In some cases, this can be just as damaging as malicious intent, especially if such incompetence results in significant financial loss or harm to the principal’s health and wellbeing.

Given these risks, when creating a POA it is vital that individuals carefully select their agent and establish safeguards to protect their interests. Choosing someone who is trustworthy, responsible and has the requisite skills is the first step.

It’s also advisable to provide clear limitations and instructions within the POA document, such as requiring regular accounting, setting boundaries for the agent’s authority or appointing a neutral third party to oversee the agent’s actions. Some jurisdictions allow for the appointment of a co-agent or successor agents, offering additional layers of oversight.

Regular monitoring and communication are equally important. Even if you appoint a trusted individual as POA, it is crucial to periodically review the agent’s management of your affairs and ensure that their actions align with your wishes.

This might involve reviewing financial statements, consulting with legal or financial professionals or involving family members or friends in overseeing the agent’s conduct. If any suspicion of misconduct or neglect arises, it is essential to take swift action, which may include revoking the POA or seeking legal remedies.

It is important to remember although a POA can be an invaluable tool for managing your affairs and ensuring that your wishes are respected, it carries inherent risks.

Not all agents have your best interests at heart. Some may act out of greed or self-interest, or they may be negligent, which can result in significant harm. Recognising this potential for abuse or other negative outcomes underscores the importance of careful agent selection, clear and well-documented instructions and ongoing oversight.

By remaining vigilant and proactive, you can help ensure that your POA serves its intended purpose – protecting your interests and honouring your wishes – rather than becoming a tool for exploitation or harm.

• Carla Seely has 25 years of experience in the international financial services, wealth management and insurance industries. During her career, she has obtained several investment licences through the Canadian Securities Institute. She holds the ACSI certification through the Chartered Institute for Securities and Investments (UK), the QAFP designation through FP Canada, and the AINS designation through The Institutes. She also holds a master’s degree in business and management