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A California power of attorney allows financial caregiving

On Behalf of | Jan 17, 2014 | Trustees Executors & Fiduciaries |

Aging California parents frequently choose a loved one, often an adult child, to handle personal finances when they no longer desire or feel competent to make wise money decisions. You might start out informally by using a parent’s PIN code to make an automatic teller transaction or step in to reconcile a bank statement.

Money management for a parent may seem like a natural part of caregiving, as much as taking over yard chores or grocery shopping. Laws don’t govern how you clip hedges, but they do kick in when you assume financial responsibility for another person. The job even has a title – fiduciary.

Financial arrangements between parents and children can remain informal, unless a parent is incapacitated. The assets and liabilities of a parent unable to make choices are not yours to manage without legal permission. An estate planning tool called a durable financial power of attorney eliminates the need for an adult child to get a court’s approval to handle a parent’s finances.

The document, initiated by the parent, designates a person or third party to take control while the parent is alive, but no longer capable of making financial decisions. Powers of attorney also exist that give fiduciaries the right to manage finances for a parent who can but no longer wants to cope with money management.

A fiduciary’s allegiance is to the person who made the choice to trust him. You are managing property and money on behalf of someone else, a duty that should not overlap with personal financial interests. Improper decisions, like commingling a parent’s money with your own, can be challenged in court.

Many people are thrust into a fiduciary position with little knowledge about the duties they are supposed to perform or the limits of the law. A parent can make the transition easier by including a proposed fiduciary in discussions with an estate planning attorney.

Source: BizTimes, “A guide to managing someone else’s finances” Jason Alderman, Jan. 14, 2014