Power of attorney
A financial power of attorney (POA) plays an integral role in taking care of a loved one. The POA must make key financial decisions on behalf of the loved one when they’re incapacitated or otherwise unable to make decisions on their own.
People will often select a POA who they know has the financial knowledge and capacity to handle the role, but it’s important to know what the legal responsibilities are and what curveballs may come your way.
Act as a fiduciary
First and foremost, all decisions made by a power of attorney must be made with the person who was assigned a power of attorney. This means all financial and property decisions must be for the benefit of them and nobody else. A POA can request a commission for their work but cannot make decisions to benefit themselves in any way.
Make decisions exclusively within the role
The role of a power of attorney will be clearly defined in the documentation filed to establish it. This means the POA should read through all documentation to get a whole understanding of what accounts, property, decisions, and other assets are to be managed.
The power of attorney should never go outside the boundary of what’s described in legal documents to fulfill needs or pay off debts. For example, consider a situation where a POA is expected to handle a specific debt and provided access to a specific account from which funds will be used to cover the debt. If the debt exceeds the amount available in the account provided then the POA should not attempt to access other accounts or sell off assets they don’t have access to. Instead, the POA should attempt to contact the person who they are representing for permission to use other means to satisfy the debt.
Keep assets and accounts separate from their own
A power of attorney may believe life will be made easier by just combining accounts, funds, and assets with their own so it can all be managed in a more centralized manner. However, this will only expose them to risk and could create liability in situations where asset and fund ownership is disputed. A POA should keep their own assets separate from the assets being managed.
However, a power of attorney may use their own funds or assets to handle certain duties and later reimburse themselves. For instance, in the above scenario where debt exceeds the funds provided through the legal documentation, the POA may choose to pay out of their own pocket and then reimburse themselves when the funds are available in the provided account(s). This is neither required nor against the law. However, whenever personal funds are used to take care of POA duties then it’s important to keep receipts to showcase a paper trail of any such transactions.
Document everything
We might not keep ledgers of all of our financial transactions these days, but a power of attorney should be doing just that when making decisions. This will protect everyone involved from liability but also make it easier to track all decisions and duties.
Whether you need a power of attorney or are assigned the duties of a power of attorney, it’s important to work with an attorney. The team at The Law Offices of Ray Garcia can draft these documents and ensure the proper execution of duties laid out within them. Contact us and make sure your power of attorney is done right.
Law Office of Ray Garcia, P.A.
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