As parents age, they tend to need help with their finances. A common practice is to appoint a trusted child as their power of attorney.
If someone appoints you as their financial power of attorney, they are giving you the legal authority to act on their behalf for financial decisions. However, this does not give you the authority to do whatever you want with their finances.
Most financial powers of attorney documents designate a list of financial transactions in which the power holder may participate. Generally, these powers tend to be very broad, covering a wide variety of financial transactions. However, there are typically limitations.
For instance, a power holder cannot gift money or assets, and cannot “self-deal” unless the power of attorney document specifically authorizes the power holder to gift or self-deal. Self-dealing means the power holder uses the grantor’s money or assets for their own benefit rather than strictly for the benefit of the grantor. Therefore, unless the document specifically states, otherwise, a power holder cannot use the grantor’s money or assets to benefit themselves. This can get tricky. A powerholder may self-deal without even realizing what they are doing.
These situations may never arise, but power holders should be aware of the duties imposed through their role as a power of attorney. Many people seek advice about designating someone as a power of attorney. However, the person being named as power of attorney should also seek advice about what are their duties and obligations as a power holder. A little advice about how to conduct financial transactions through a power of attorney can save a lot of potential trouble in the future.
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