Power of Attorney for an Older Adult's Financial Matters

A financial power of attorney for a relative allows you to manage their financial matters. It is a legal document that names you as their agent or "attorney in fact."

You must act in an older adult's best interest and may have to make some difficult calls. Problems can arise when family members second-guess your decisions, and disputes can result in audits of your activities or expose you to liability.

How Do I Take Control of a Loved One's Finances?

You can create a DIY financial power of attorney document for a loved one at home. If the assets or situations are more complex, you should speak with an estate planning attorney in your local area.

Once you have the proper legal authority, you can access your loved one's accounts, real estate, personal property, credit cards, and debts. You should be aware of any Medicare, Medicaid, and Social Security benefits.

It helps to have a list of the assets before this process begins, but gathering accounts and passwords can sometimes be complicated. This step is complicated further if your loved one is facing memory issues or is incapacitated.

Exercising power of attorney doesn't need to be fraught with danger and anxiety. You need to understand your legal obligations and take some simple steps to ensure you have documentation of your actions. You can feel secure that you end up in trouble — even if a disagreement results in litigation.

Organizing Finances When You Have a POA

Once you know what assets a loved one has, you need to keep things separate and organized. If you mix the power of attorney funds with your finances, it becomes unclear which expenses and funds are yours and which are associated with the beneficiary.

Below are some basic tips — but remember that every bank has its own rules and procedures, so check with your local bank before doing the following.

Create a Bank Account in Your Relative's Name

Opening a separate account to handle all the financial matters concerning your relative is the easiest way to keep track of everything and, more importantly, to keep everything separate. Financial institutions frequently work with powers of attorney and know how to comply with legal documents and state laws.

It's vital to keep your power of attorney finances separate from your regular finances if there are questions about your handling of the power of attorney finances down the road. It can be a nightmare to determine which expenses were related to the power of attorney matters after the fact.

Choose Whose Name the Account Is In

Banks differ, but generally, get the account in the name of the person you have power of attorney over. Having the account in your relative's name keeps things distinct. Since you have power of attorney, you will still have access and control over the account.

How Do I Sign the Checks?

Find out what your bank prefers. In general, you can sign checks in your relative's name. You likely also need to include the phrase "power of attorney" or "POA" along with your name.

Maintaining a separate account for your relative (in your relative's name) makes paying bills and receiving payments much more manageable. It will also help during tax season and save you headaches if the IRS or someone else ever challenges your power of attorney status.

What Can Happen if I Don't Take Over an Older Adult's Finances?

Finances can become a hazard for older adults as they lose their decision-making ability. Financial scams from nursing home staff or strangers are a real danger, and family members or assisted living staff can conduct financial fraud.

A power of attorney form officially filled out in your state can avoid poor financial decisions or scams due to your loved one's incapacity.

What About Paying for Medical Care?

Once the financial POA is established, all financial affairs will fall under the agent's authority. If your loved one designates someone else as health care power of attorney, these two agents must get along and make decisions together.

Remember that older adults often name successor agents, so you may start working with one person and eventually work with another.

Both types of power of attorney must act in the older adult's best interests. An older adult may outline medical decisions in a healthcare directive or living will, and the healthcare POA should follow these wishes. They should make logical and caring decisions without spoken or listed wishes or legal documents.

As the financial power of attorney, your job is to financially support these healthcare decisions when you can, push back if you have questions, and use the older adult's funds or benefits to cover costs.

What Is the Difference Between a Power of Attorney and a Will?

A "durable financial power of attorney" is a legal document that goes into effect when a loved one becomes incapacitated through illness or injury. "Durable" means a document still goes into effect when someone can't make decisions any longer. This document will last until someone's death unless the original creator makes changes.

A will is a list of someone's personal property and how they want it distributed after death. While it talks about money and how to divide any leftover money, a will doesn't name anyone as an agent to make financial decisions during their lifetime. A will may have an "executor," but they do not handle financial decisions while the will's creator is still alive.

Both documents are important and will ease the stress of handling a loved one's affairs after incapacitation or death. A power of attorney is the only way to give a trusted person power to make financial decisions for an older adult.

When To Consider Calling a Local Estate Planning Attorney

Handling a financial estate under power of attorney involves some complicated practical issues. You'll want to be sure that your actions are appropriate and won't result in a legal dispute. This could be easy or challenging, depending on the circumstances. Overviews and forms can help you understand some basic principles guiding power of attorney, but they can't ask questions or tailor responses to your specific concerns. Find an experienced estate planning attorney near you today.