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From what I've read, a doctor can't revoke someone's license himself but rather they can contact the DMV and let them know your aunt is unfit to drive due to Alzheimer's. In some states both the courts and the DMV are needed to revoke a license.
Since laws do vary from state to state, it would be wise to find out the specific rules of your state (assuming she lives in your state - otherwise, you'd have to research the state she lives in).
If she were to drive YOUR car, then yes you could be liable otherwise no, you are not responsible for another adult other than morally.
Also, you might want to consider the issue of insurance. Most states require someone to have a valid driver's license in order to obtain insurance.
Just with what has been mentioned, It sounds way too risky - why take the chance?
When I took my mom's car key's away (and I forgot to mention I am her P.O.A.), I used a locking steering wheel device (she drove fast, got lost, ran a red light and got a couple speeding tickets and then was diagnosed with Alzheimer's). This was extremely hard for me to do as she loved driving her whole life. She was very upset and mad at me as well as my husband no matter how many reasons I gave but, I couldn't bear the thought of living with the guilt and trauma if she were to get in an accident injuring or killing herself, others or both. If she injured or killed others, I wouldn't want her to live with it either. So that being said, I asked for the keys, put the device on and locked it because I was never sure if she gave me ALL her keys since she kept spares. Then I would go to her house and do the driving and put it back on before I left. Eventually, I placed her in an assisted living facility and sold the car. The facility had a transportation bus if she wanted or needed to go somewhere (within a certain radius).
You can go to the website: www.dementiacarecentral.com for some other information on dementia and driving issues. But, mostly you should try to do more research online as to when the law and liability come into play. Good luck!
That being said, if an unlicensed driver has an accident in an insured car, the insurance company CAN, in some instances, decide not to pay some/all of the damages. What they usually WILL do after an incident such as that is to cancel the policy on the car.
I agree with CountryMouse. If it was the OP's car she was driving, then she would have financial responsibility should an accident occur. As POA, no, she is not financially responsible. If that were the case, no one would ever agree to ever take on POA responsibilities.
To the OP: If you haven't already done so, have your aunt's doctor explain to her why she should not be driving. Or if there is someone else in the family to whom she defers authority, have them speak to her. (In some instances, for example, my mother will acquiesce to my husband rather than me, even though we are telling her the same thing).
Or, as a last resort, maybe hiding the keys would work.
Your power of attorney (if that's what you mean) gives you the authority to act FOR your aunt. It in no sense gives you any authority OVER her. You do not by virtue of your POA have any more power to regulate her conduct than you do, say, her dress sense or her choice of meals.
What you might do as an informed, concerned and responsible citizen is a different question. If you know, because she has told you, that she is driving without a valid licence you can:
state forcefully to her that if she has no licence, she also has no insurance and she is driving illegally;
that being aware of the same you have no option but to bring it to the attention of the authorities, including law enforcement;
and that unless she gives you a credible undertaking that she will stop driving you will go right ahead and do that.
But first of all - research alternative transport and offer to set it up for her. She'll probably save money, all told, by the time you factor in running costs, fuel, insurance, parking, maintenance; and she should gain considerably in terms of convenience and peace of mind.
Where's she driving to? If she lives in a place where there is genuinely no alternative means of transport - no cab will go there, no bus within walking distance, no kindly neighbours or community minibuses or voluntary services - then perhaps this is also a good time to think seriously about her location and access to services in general.
And last question: what is she driving? If it has resale value, find out how much and get her to picture the cash. If it has sentimental value, is there a deserving young family member she might generously bestow it on?
When I personally was faced with this situation, it was an elderly lady who "refused" to stop driving. The thing was that she lacked the physical ability to even get TO the car - let alone get in it. It was a lot of grandstanding on elder's part and no real risk to her or to other drivers because it wasn't going to happen. However, had she truly had the ability to get to the car and drive it, I would have had to remove the car from her reach and park it elsewhere to avoid harm to her, other drivers, and any chance of legal liability to anyone. One more note: Hiding the keys frequently does not work as elder often has another set stashed somewhere.