A financial power of attorney allows another person to manage the financial affairs of the person who grants it. It is commonly used by elderly adults to grant the power to a loved one so that the loved one can keep track of their finances and manage them. If you have a financial power of attorney from your elderly loved one, completing your duties can become complicated.
Problems may arise when other family members second-guess your decisions. Disputes may lead to audits or possibly expose you to liability. Elder Care Direction can offer you guidance on financial powers of attorney and refer you to an elder law or estate planning attorney if you need further legal help. If you take some steps to document your actions and understand the legal obligations that you have, you can feel more confident that you will not lose a case even if litigation happens.
What is a financial power of attorney?
A financial power of attorney is a document that allows someone other than the grantor to manage the grantor’s finances in the event of incapacitation. The power of attorney is granted in the document and only comes into effect when the grantor is no longer able to make decisions for himself or herself. The document gives the attorney-in-fact or agent the legal ability to act on behalf of the grantor for financial decisions. An attorney-in-fact has a number of duties, and it is important for you to understand what they are.
Organization of the finances
When you are serving as an attorney-in-fact under a financial power of attorney, it is vital for you to keep the finances organized and separated. You should never mix the power of attorney funds with your own. If you do, it can become unclear which are yours and which are the funds of the grantor. The following are some tips to help you to manage and organize the finances of your loved one. However, each bank has its own procedures and rules, so you should check with yours before you do any of the following.
Start by opening a bank account in your loved one’s name. This account should be separate from your own, and it should be used to handle your loved one’s financial matters. It is very important for you to keep your loved one’s finances completely separate from your own in case questions arise about how you are handling your loved one’s money in the future. It can be difficult to figure out which expenses were related to your loved one’s affairs in the future when they are not kept separate from your own.
If you can, open the account in your loved one’s name and not in your own. Doing this can help to keep everything distinct. Since you have a financial power of attorney, you should still be given access to and control over the account.
Ask the bank about how you should sign the checks. In general, you can sign checks in your loved one’s name with the phrase “power of attorney” underneath. Finally, you sign your own name.
When you keep a separate account in your loved one’s name, it can make receiving payments and paying bills for him or her much simpler. Having a separate account will also help you when it is time to file taxes for your loved one and can help you if someone else ever tries to challenge your status under the power of attorney.
Powers of an attorney-in-fact
The attorney-in-fact does not have to be a lawyer. It instead is simply a person who is granted the legal authority to make financial decisions on behalf of the grantor if the grantor becomes incapacitated. These documents do not become effective until a grantor has become incapacitated to the extent that he or she is unable to make decisions on his or her own. The person who grants the power of attorney may set limits on how much power the attorney-in-fact will have in the document. Some of the powers that may be granted in this type of document include the following:
- Filing and paying taxes
- Paying bills
- Paying for medical costs
- Managing real estate and other assets
- Accessing financial accounts
- Collecting retirement benefits
- Investing wisely
- Transferring or selling assets
- Purchasing insurance
- Operating a business
- Hiring an attorney to represent the elderly person
The attorney-in-fact must always act in the best interests of the grantor. This means that you are not allowed to simply do whatever you want. If your loved one granted a medical power of attorney to someone else, it is important for you to work together with him or her when it comes to your loved one’s medical care. Disputes occasionally arise about paying for the cost of medical care when the two attorneys-in-fact are unable to agree.
When does a power of attorney end?
A power of attorney can end in several ways, including the following:
- When your loved one dies
- When your loved one is no longer incapacitated and revokes the power of attorney
- When you become unable to fulfill your duties
- When a court invalidates the power of attorney
Get help from the professionals at Elder Care Direction
If you have been granted the financial power of attorney to manage the financial affairs of your loved one, performing your responsibilities can lead to complicated issues. It is important for you to make certain that you always act appropriately so that a legal dispute won’t arise. Depending on your circumstances, managing your loved one’s finances can be hard. Elder Care Direction can help you to understand your duties and provide you with some basic guidance. If you have encountered more complex legal issues, we can refer you to an experienced estate planning attorney. Contact us today to schedule an appointment.