Power of Attorney Abuse

Please visit my petition to strengthen the protections of the elderly against Power of Attorney abuse.  The link to the petition posted on the White House web site is as follows:

We the People White House Web Site for Citizen petitions

Abuse of Powers of Attorney (POA), especially in the case of the elderly, is currently very hard to recognize and difficult to prosecute because of the limitations in or absence of state laws that define it. When you are a senior it is increasingly more difficult to monitor whether your agent is acting on your behalf and it is estimated that over 80,000 cases of elder abuse through power of attorney abuse are reported each year.  We believe that state laws should recognize this and impose legal requirements over the whole process of power of attorney; from drawing up the POA, allowing for auditing the POA and defining specific procedures and penalties for prosecution of abuse where the principal is incapacitated or not.

For example, when a person (principal) visits a lawyer to draw up a Power of Attorney the law should protect the principal by requiring the lawyer to give statistics on Power of Attorney abuse.  Additionally, the law should require the attorney to offer protections in the the letter of the Power of Attorney document.  

Such protections might include requiring a named third party family member to review the financial books of the principal to ensure that the agent is acting in the best interest of the principal.  Most of the cases of Power of Attorney abuse stem from the agent using the principal's assets for their own benefit.  This has made the Power of Attorney become known as the license to steal.  

There should be a statement in the Power of Attorney document that holds the agent liable for any actions taken that are not in the best interest of the principal.  State laws should define these transgressions and assign criminal and civil penalties appropriate to the crime.

Suspicion of abuse by other family members should be enough to require a court to open up the principals financial records for scrutiny and evidence of abuse.

The POA document should not allow clauses that generally describe insurance policies that the agent may take out on the principal where the agent is the beneficiary.

The POA document should not allow the POA agent to be the same person as one who is also the sole beneficiary of the estate described in the last will and testament of the principal.

The POA document should not allow clauses that allow the agent to make gifts to himself/herself or the agent's family members.

The POA document should not use open ended statements that would benefit the POA. For example,  being paid fair, reasonable and adequate compensation for services plus all expenses especially when the POA is a family member or other person who is benefitting from the housing, food, utilities and comfort of residing in the principal's home without paying for any of it.

If abuse is found, there should be penalties established and carried out against the (POA) agent.

It is certain that all of us will age.  In order to prevent the despicable acts of elder abuse and Power of Attorney abuse that I have seen occur and may one day affect any one of us, I urgently ask your support of the petition I have posted and noted the link here and above.  We the People White House petition site

Thank you for your support.

How to shelter $100,000,000 in an IRA

Recent controversy over Mitt Romney's tax returns has included questions over his IRA (individual retirement account) which is reported to contain well over $100,000,000.

For those of you who do not have an IRA, it is important to note that regulations impose a $5000 limit to the annual contribution that an individual can make to it and even less than this was allowed in the years before 2012.

If Mitt Romney worked at Bain Capital for 25 years, then at the current allowable deposit amount and excluding interest, Mitt's principal would grow to $125,000 in that time.  Yet Romney has nearly 1000 times that amount in his IRA.  So let's say that the investments made by the IRA gave Romney a 15% return each year.  After twenty-five years that IRA should contain about $1,600,000.  Still a far cry from $100,000,000.

So how could Romney's IRA contain so much more?  Allow me to speculate.

When Romney founded Bain Capital, it was created as a Private Corporation.  Legally, Private Corporations do not have the financial transparency that Public Corporations have.  The stock of the Private Corporation is not sold to the public and usually remains under the ownership of the partners of the Investment firm.

The United States Treasury Office began to see a phenomenon occurring with Private Corporations around year 2000.  In increasing numbers, Private Corporations began to find tax shelters to protect their profits from United States taxes.  Additionally, certain stock based compensation plans did not comply with what IRS called "deferred compensation" tax rules.  For example, certain individuals were given stock options with an exercise price that was less than the fair market value of the company's common stock.  To block this practice after year 2000, regulations were adopted to add an additional 20% tax on these transactions.  The idea was to discourage evading taxes by writing regulations that made it less profitable to do so.

In certain companies (Bain may be one of them), under-priced stocks were given to the owners and directly deposited into their IRA accounts.  So let's say the $5000 limit on the IRA deposit was achieved by under-pricing these stocks by a huge amount.  For example, let's speculate that the per share fair market value of the stock was $50.00 but the owners got shares deposited into their accounts at $0.10.  In that case, the number of shares at the fair market value is 100, but at the reduced price is 50,000.  For reporting to the IRS, the Individual Retirement Account meets the regulations and only $5000 is reported as being deposited.  Yet in reality, the true value of the number of shares is 50,000 shares x $50.00 per share = $2,500,000.  

Repeat this year after year and you will soon have $100,000,000.  Even if you do not reduce the price of the stock as much as in my example, you will still be there in no time.

If the individual has a Roth IRA, then the situation is even more favorable.  With a Roth IRA, the taxes are paid on the deposit amount and are not taxed upon withdrawal at retirement.  So in our example above, the Roth IRA owner would pay taxes on $5000 up front and not on the $2,500,000 withdrawn during retirement.

So if you want to shelter $100,000,000 in an IRA, open a Private Corporation, setup a Roth IRA and give yourself stock options at a seriously reduced price.  Pay taxes on $5000 and enjoy the tax-free high life at retirement.