How to Manage Someone’s Finances with a Power of Attorney

Taking control of someone’s finances can feel overwhelming. But stepping in becomes essential when a loved one can no longer handle their own financial matters.

This is where a Power of Attorney (PoA) becomes valuable. It gives you the legal authority to act on their behalf. You’re now responsible for managing their bank account, paying bills, and making key financial decisions. It’s your job to keep their financial affairs in order.

In this guide, you’ll learn how to handle someone’s finances with PoA. Know what you can do, do it right, and keep their well-being at the center of every choice.

What Is a PoA or a Power of Attorney?

A Power of Attorney (PoA) is a legal document that grants one person the authority to make decisions on behalf of another. This can include managing a bank account, health care, and paying bills. You’re also in charge of their insurance policies, real estate, or other important financial transactions.

When a family member can’t make their own decisions due to age, illness, or mental incapacity, PoA steps in; it gives you the ability to act in the incapacitated party's best interests.

There are different types of PoAs. A financial PoA focuses specifically on handling money, assets, and legal transactions tied to those.

With the right PoA in place, you’re legally allowed to help protect their financial well-being.

How a Durable POA Can Help You Manage Someone’s Finances

A Durable Power of Attorney (PoA) is built for long-term situations. When someone’s health declines, their ability to manage money fades. In cases like dementia or serious illness in aging parents, a durable PoA steps in. It ensures their finances stay in order when they can no longer do it themselves.

This legal tool lets you take control. You can manage bank accounts, pay bills, handle investments, and oversee benefits like pensions. Unlike a regular PoA, a durable one stays active even after mental capacity is lost. It protects against poor financial decisions and keeps their affairs stable.

How to Establish Financial Control Legally

1 . Choose the Right Type of PoA

Start by selecting the type of Power of Attorney. A Durable Financial Power of Attorney is usually the best option for long-term care situations. This is especially if the person may lose mental capacity. This ensures you can manage their finances even if their health declines.

2 . Draft the PoA Document

Next, create the Power of Attorney document. You can do this through a lawyer or an online legal service provider. Clearly define the financial responsibilities, whether it’s handling bank accounts, paying bills, or managing investments.

3 . Sign and Validate the Document

The person granting the power must sign the document. Usually, it’s done in the presence of a notary or legal witness. This step ensures the PoA is legally binding and recognized by financial institutions.

4 . Notify Relevant Institutions

Finally, inform key institutions like banks, credit card companies, or government agencies. Provide them with a copy of the PoA so they recognize your authority. Remember, acting as a fiduciary means you’re legally required to act in the person’s best financial interest.

Common Mistakes to Avoid When Managing Finances with POA

Managing someone’s finances with a Power of Attorney is a serious responsibility. Avoiding common mistakes can help you handle their money with care and protect both of you legally.

1 . Mixing Personal and POA Finances

One of the biggest mistakes is mixing your personal funds with the person’s money. Keep their bank accounts and assets separate. This way, you’ll protect yourself from accusations of mismanagement. Use a separate bank account to ensure clear lines between your funds and theirs.

2 . Failing to Keep Detailed Records

Every transaction you make on their behalf should be documented. Keep clear records of every payment, withdrawal, or investment. This helps with transparency and protects you if someone questions your actions. Good record-keeping is a must.

3 . Making Financial Decisions Without Consent

When possible, involve the person in their financial decisions. Even if they’ve given you authority, their input can guide you. It shows respect and can prevent misunderstandings later. Always remember that you’re acting in their best interest.

4 . Neglecting to Understand the Limits of Your Power

A POA grants specific rights, but those rights have limits. Ensure you know exactly what financial actions you’re allowed to take. Overstepping your authority can cause legal problems, especially with fiduciary responsibilities involved.

5 . Not Staying Updated on Their Financial Situation

Their financial situation can change, and you need to stay on top of it. Regularly review their accounts, expenses, and investments. Adjust as necessary to ensure they’re financially secure in the long run.

FAQs about Financial Power of Attorney

Can a Power of Attorney Be Changed or Revoked?

Yes, as long as the person granting the POA still has mental capacity, they can change or revoke it. It’s important to keep updated documentation to reflect any changes. If their mental capacity declines, the original POA remains in effect.

What Happens If the Person I’m Managing Finances for Passes Away?

A Financial POA ends when the person dies. After that, responsibility for their finances transfers to the executor of their will. It’s crucial to inform the right authorities and provide final account statements to ensure a smooth transition.

How Do I Protect the Person’s Finances from Fraud or Scams?

Monitor their bank accounts regularly and set up alerts for unusual activity. Be cautious with online transactions, and consider limiting access to certain accounts. You may also want to explore legal options like establishing a fiduciary to prevent misuse.

Are There Any Tax Implications When Managing Finances with a POA?

Yes, managing someone’s taxes is part of your responsibility under a POA. This includes filing tax returns, paying taxes on time, and managing any tax refunds. Failing to handle this properly can result in penalties or legal issues.

Can a Power of Attorney Be Used for Investments?

Yes, a POA can authorize you to manage the person’s investments, but only if the document specifies this authority. Always consult their investment advisor or financial planner to ensure decisions align with the person’s long-term goals.

More Questions? Contact My Canada Payday Today

Managing finances doesn’t need to be complicated. When you have the right tools and support, you can move forward with confidence. If you’re ready to take control of your financial future or have questions, now’s the time to act.

Contact My Canada Payday to get personalized guidance or apply for a loan today. Solutions are available to help you meet your needs quickly and efficiently.