First, check to see if it is a Medical Power of Attorney or Statutory Durable Power of Attorney. They provide different powers to their agents, as their titles suggest. This post is about the Statutory Durable (or financial) Power of Attorney.
Second, be grateful that she signed a power of attorney. If she had not, you would need to go to court to be appointed as her guardian, which is a much more expensive and more cumbersome process. A guardian has to ask for court approval for almost every expense. An agent under a power of attorney does not.
Second, read the power of attorney. Does the form say it is effective immediately or does it only become effective if your mother becomes incapacitated? If she has to be incapacitated, you will probably need to obtain something in writing from her doctor saying that she is unable to handle her financial matters. But read the document to see what is required.
Third, figure out what powers you were granted. Texas has a statutory form, but attorneys often add provisions to give more or less powers to the agent or to clarify some of the powers. Usually there is a list at the beginning of the form of powers you have been granted. Did your mother only initial some of the lines in front of the listed items or did she initial the very last line saying she grants all of the powers listed above. To figure out what a listed power covers, you will have to look at the statute or ask a lawyer. If the form doesn’t give you the power to take a specific action, don’t do it. For example, if the form does not say you can give gifts, don’t give money to family members – even if you know your mother would have wanted you to. Gifts are not covered by the initial list of powers but is usually discussed later in the form. Often when an agent has the power to give gifts, that power is limited in amount. Check the document.
Fourth, you are responsible for managing your mom’s money just as she would have – or perhaps better than she would have. When acting as her agent, you are a fiduciary, which means you have the duty to act in her best interests – even if those interests conflict with your own. Other family members can sue you if they think you misused mom’s money. Additionally, it is a crime in Texas to misapply or misappropriate someone’s assets when you are acting as their agent – it’s a felony if more than $2,500 is involved. So how do you handle your mom’s money to avoid trouble?
The very basic rules are:
- Very carefully follow the terms set by the Power of Attorney that appointed you as her agent. If you aren’t sure whether you can do something, talk to an attorney before doing it or just don’t do it.
- Figure out what she owns and what bills she needs to pay each month. Depending on the terms of the document, you are probably responsible for managing both.
- Keep careful records/receipts of every dime of your mother’s money that you spend. It’s best to keep a ledger of some kind listing all expenses by date. Number each entry and put the same number on the receipt. Keep each month or year in a separate envelop.
- Make sure every dime of your mother’s money is spent for her benefit unless the power of attorney authorizes you to give money to family or charity. Even if authorized to make gifts, be very careful. You still have the obligation to act in her best interests.
- Keep the incapacitated person’s money in a separate account – do not ever mix it with other funds. Do not ever put any of her money in your bank account. However, you can reimburse yourself for amounts of your money that you can prove you spent for her benefit.
- Try to keep the incapacitated person and family members who are potential troublemakers informed about mom’s financial situation and about big expenses you are paying on her behalf. If they don’t object, then a later claim that they thought you misused mom’s money should be weaker. If you know someone is going to cause trouble regardless, then continuously refer back to rules 1-4 to protect yourself.
If you or a family member needs a power of attorney or if you need advice about acting as agent under a power of attorney, contact our office. For more information about estate planning, visit our website at www.baumerlaw.com/estate-planning.
Megan Baumer Estate Planning and Elder Law Attorney Law Office of Michael Baumer 512-476-8707 www.baumerlaw.com/estate-planning
