Should I Accept Financial Power of Attorney for a Family Member?

Quick Answer

Before you agree to be a financial power of attorney for a family member, consider the duties you’ll need to fulfill and the amount of time you have to help manage their finances.

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A loved one wants to name you as the designated agent in their financial power of attorney. Should you say yes? Being a designated agent is a big responsibility. When deciding whether to accept financial power of attorney, consider factors such as how much time you have to commit to the responsibility, your distance from the person and your relationship with them.

What Is Financial Power of Attorney?

Financial power of attorney is a legal document in which one individual (the principal) gives another (the agent or attorney-in-fact) the power to make their financial decisions. A power of attorney can be general, giving you wide-ranging authority over the principal's financial affairs, or can limit you to a particular type of financial decision, such as buying or selling real estate.

Power of attorney documents can be designed in various ways. For example, a conventional power of attorney ends when the principal becomes incapacitated; a durable power of attorney does not. There are also springing powers of attorney that take effect only when the principal is incapacitated.

Laws can vary from state to state, but a financial power of attorney typically authorizes the agent to do the following for the principal:

  • Manage their bank accounts
  • Buy or sell property for them
  • Manage their business affairs
  • Handle legal matters such as contracts or lawsuits
  • Make decisions about their insurance, retirement plans and investments
  • File their tax returns
  • Apply for and manage government benefits

What Are the Duties of the Designated Agent?

As a designated agent, you are considered a fiduciary and have four primary responsibilities.

  1. Act in the principal's best interest, even when that differs or conflicts directly with your own. If the principal is still of sound mind, consult them before making decisions; if they're not, make decisions based on what you think they'd want. Be especially cautious when doing anything that could benefit you.
  2. Manage the principal's money and property with care. Negligence can get you in legal hot water. Make sure to pay their bills on time, and research and carefully consider any financial decisions.
  3. Keep your money separate. Mixing your assets with the principal's can make it unclear who owns what, and can lead to legal problems. Don't use your money to buy things for the principal and reimburse yourself using their bank account. Instead, use the principal's checking account or credit cards to make purchases on their behalf.
  4. Keep detailed records. Document everything you spend or receive on the principal's behalf. Maintain records of all transactions and keep receipts.

How to Decide Whether to Accept Financial Power of Attorney

Reasons you might want to accept financial power of attorney include:

  • Helping a loved one: Without a power of attorney, the court may appoint a guardian or conservator to manage the person's finances. Most people prefer to have someone they know handling their affairs.
  • Making your life easier: If you're already caring for a loved one, financial power of attorney could simplify matters by letting you manage their finances too.
  • Guarding against fraud: A family member with cognitive issues may make poor decisions or fall for financial scams. As a designated agent, you can catch errors or signs of fraud that they may not notice.

Reasons you might want to decline financial power of attorney include:

  • Time commitment: Being a designated agent can be time-consuming, especially if the person's finances are complex. Be honest about whether you can give this responsibility the time and care it deserves.
  • Distance: Many financial decisions can be handled online, but sometimes you must be physically present. For instance, you may need to visit the bank with the power of attorney document to access the principal's accounts or present the document in person when signing a contract. This can be difficult if you live hundreds of miles away.
  • Ability: If managing money isn't your strong suit, taking on someone else's finances may not be wise.
  • Emotion: Difficult relationships with your family members may prevent you from making the best decisions.

Consider having your loved one designate alternates or successors to assume duties if you can't. They can also appoint more than one agent (called co-agents). Co-agency can ease the burden by splitting responsibilities, but can also cause problems if agents don't agree. The power of attorney document should specify whether co-agents can act independently or must agree.

Alternatives to Power of Attorney

You don't have to accept these responsibilities to help a loved one. Some alternatives include:

  • Enlisting a professional fiduciary: An accountant or attorney can assume financial power of attorney. You can also ask a court to appoint a professional guardian or conservator.
  • Finding a friend: Designated agents don't have to be relatives. See if your loved one has a trusted friend who can take on the job.
  • Becoming a trusted contact: Financial institutions may let family members add a trusted contact person to their accounts. The company can contact you if they suspect your loved one is being scammed or exploited.
  • Having your loved one open an agency or convenience account: Different from a joint account, this lets your loved one designate you to write checks, pay bills or deposit money for them.
  • Becoming a trusted caregiver on accounts: You'll be able to pay your loved one's bills in an emergency, track account activity, and set up automatic payments and account alerts.
  • Enlisting a VA fiduciary or Social Security representative payee: The government can designate someone to manage your loved one's Department of Veterans Affairs or Social Security Administration benefits.

Financial Help When They Need It Most

Becoming a designated agent can safeguard a vulnerable loved one's financial future, but it's also a big responsibility. Before agreeing, consult an attorney about the laws governing your duties, and make sure the power of attorney document explains how to resign as agent if you want to. Once you've decided whether to accept power of attorney, assess your own situation. Designating power of attorney should be part of every estate plan—and it's never too early to begin putting that in order.

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