It appears that his wife took it upon herself to have the mentally ill sibling sign a form giving her authority to handle his affairs. I think there should have been a discussion about this and perhaps a surviving sibling should have been appointed. Is this something an attorney should handle for the surviving family members?
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Please note that only the ill sibling can appoint someone to be his Power of Attorney. Does he have times where he is clear minded so he can make a sound decision? Do you know if an Attorney made the change to the Power of Attorney to have the sister-in-law as his Power of Attorney.
Note, not everyone chooses a family member to be their Power of Attorney. Anyone can be assigned.