Financial Powers of Attorney grant both authority and responsibility.
You have been granted financial power of attorney.
This action speaks to your character and trustworthiness.
You are flattered.
You are also a bit worried.
And with good reason.
You are not quite certain what responsibilities (and potential liabilities) you have under the financial power of attorney.
According to a recent Kiplinger article titled “What Are the Duties for Financial Powers of Attorney?,” your role as the “agent” or “attorney-in-fact” is to act on behalf of the principal on all accounts and financial matters detailed in the power of attorney document.
What should you do?
Read the document.
The best source for understanding your responsibilities is the financial power of attorney itself.
This not the time to think great thoughts.
Just read the rules.
This document gives you legal authority as the agent and outlines the extent of your authority.
Inventory assets and liabilities.
What will you need to find?
Look for information on bank accounts, brokerage accounts, and retirement accounts.
Gather tax bills, mortgage papers, and insurance premium invoices.
Find information on the monthly bills for cable, phone, internet, and utility bills.
Having these will help you as you take care of the financial affairs of the principal.
Review recurring expenses and spending habits.
You should have an idea of money flow.
This should include how payments are typically made and to what service providers or vendors.
Are many bills paid through online accounts?
If yes, you will need to contact any such financial institutions to prove you have financial power of attorney to manage the accounts held there.
Note: if you will be accessing online accounts, then confirm that the financial power of attorney gives you such authority under state law.
You will also need the login information for these accounts.
Is your principal over age 72?
You will need to take required minimum distributions from his or her retirement accounts to avoid incurring a penalty.
Are you having fun yet?
If the principal is in the hospital or an inpatient facility, his or her home could be vulnerable to thieves.
You will need to regularly check on the home to make sure it is secure.
Take inventory of the residence.
You can utilize video to walk through the home and catalogue what is present.
If the principal will be gone for long time, consider stopping the phone and newspaper.
Other family members may take property claiming it was promised to them or belonged to them.
Yes, people really do this.
Do not allow this to happen.
You may need to change the locks to best secure what the principal owns.
If the principal is incapacitated, the person with the financial power of attorney is responsible for paying the bills.
Some of these may be set up on automatic withdrawals.
Check credit cards statements and bills for potential fraudulent activity.
If you see suspicious activity, you may need to suspend the card and set up an alternative payment method for bills.
The principal will still need to file and pay taxes if incapacitated.
As the agent named in the financial power of attorney, you will be responsible for this task while the principal is alive.
When the principal dies, the executor of the estate will prepare and file the final tax return for the estate.
Ask about estate planning.
It is wise to understand the estate planning goals of the principal.
The actions you take should align with estate planning wishes.
If Medicaid is required to pay for nursing home care, you should secure the services of an elder law attorney to help with paperwork.
Money is often a heated topic.
To protect yourself from false accusations of mismanagement, track your expenditures made on behalf of the principal.
Doing so will help prove you have acted in the best interests of the principal.
Always do what is best for the principal.
Consider retaining the services of a third-party bookkeeper or accountant.
Most financial powers of attorney this.
Not only is accounting not in your skill set, but setting up this independent oversight as a check and balance can go a long way toward protecting all concerned.
The authority granted with a power of attorney is one of stewardship.
The money does not belong to you.
It belongs to the principal.
The actions you take should benefit the owner of the assets.
If you are desire clarification on the personal wishes of the principal, contact his or her estate planning attorney who set up the financial power of attorney.
Reference: Kiplinger (April 22, 2020) “What Are the Duties for Financial Powers of Attorney?”