What you need to know about ‘power of attorney’

Wednesday, February 03, 2016

A power of attorney is a written document in which one person gives legal authority to another to make decisions about his or her money or property. (Limited power of attorney can be granted to allow you to perform a specific task, such as closing on a property purchase or sale, or for conducting business for the other person within a specific time period.) The document will contain the signature the person granting the power of attorney and the name of the person power of attorney is granted to.

If you've been named to manage money or property for someone else under a power of attorney, you are the fiduciary. It doesn't matter if you're managing a small amount of money or a lot, or if you're a family member or not—you're legally responsible for managing money or property for the benefit of that person, known as the principal.

If you were chosen as fiduciary, you are recognized by the person who grants you this authority as a trustworthy, honest, and responsible person. Preparing yourself with the necessary information will help you manage your responsibilities and will bring you, and everyone involved, peace of mind.

Your legal duties

While a power of attorney can seem like a complex document, there are just four major duties you need to execute as fiduciary:

• Act only in the other person's best interest.
• Manage money and property carefully.
• Keep your money and property separate from the other person.
• Keep good records.

Because you're managing someone else's money, your responsibility is to make decisions that are best for that person. This means managing the money carefully, using good judgment and common sense, and never mixing your assets with the other person's. Keeping true and complete records is important; incorrect or incomplete records can get you in trouble—not just with the other person, but also with the police and with government agencies, such as a city's or state's Adult Protective Services office.

Signs of financial exploitation

Financial exploitation has been called "the crime of the 21st century." As a fiduciary, you hold a lot of power over the other person's affairs. As such, you should know the signs of financial exploitation. Recognizing what to look for will help you protect both yourself and your loved ones. Be wary if:

• You or your loved one thinks that money or property is missing.
• Your loved one shows sudden changes in spending and saving behavior.
• Your loved one puts names on bank accounts and property that can't be explained.
• Your loved one fears a relative, caregiver, or friend.
• A relative shows controlling behavior towards you or a loved one.

Even if your loved one controls only some (or none) of his or her funds, he or she can still be exploited. If he or she was exploited in the past, before you become involved, there still may be something you can do about it. You can, for example, alert banks and credit card companies or talk to an attorney about preventing future exploitation and recovering the property that was taken.

Anyone with any money could be targeted by a fraudster at some point. But you can help protect your family and friends by recognizing how these criminals operate and by reporting suspicious scams and questionable sales pitches.

Thanks to USA.gov for the original article, which has been adapted by Consumer Action.