If you’ve been named as financial power of attorney for a loved one are you ready for the responsibilities that entails?
A financial power of attorney is a document allowing an agent to act on a principal’s behalf to pay bills, manage accounts, pay taxes, buy and sell real estate and many other matters listed in the document. This can be daunting so here are 8 steps to make it easier:
Step 1: Don’t panic. Do start reading.
Read the power of attorney document and understand the various powers you’ve been given to handle on behalf of the principal.
Step 2: Figure out what you are in charge of.
List the principal’s assets and liabilities including: bank and brokerage accounts, retirement plans, mortgages, tax bills, utility bills and insurance bills. Determine recurring expenses by assisting the principal with mail for a month. Organize bills, especially tax bills. Be sure to arrange for required minimum distributions if your principal is over age 72. Notify the principal’s banks and brokerage firms of your power of attorney and authority to act.
Step 3: Protect the principal’s assets.
Make sure their home is secure. Check for damage and maintain the home well, being mindful of water and heating/cooling systems. Visit often and consider changing locks if scammers appear. Watch out for “poacher” family members who claim assets for themselves. Monitor brokerage accounts for high risk transactions such as options, puts, calls or commodities. If you live far away, arrange for local oversight.
Step 4: Pay bills as necessary.
Review bills and credit card statements for fraud. Suspend credit cards not in use unless auto-payments come from it.
Step 5: Pay the taxes.
File and pay the principal’s income taxes. When the principal dies, the Executor takes this over.
Step 6: Estate planning.
If the principal does not have a trust, consider using your power of attorney to set one up.
Step 7: Keep excellent records.
Track every dollar in and out to prove you have met your fiduciary duties and also, to be reimbursed for expenses or even for your time.
Step 8: Act in the principal’s best interests.
Honor the principal’s wishes whenever possible. If you don’t know their wishes, act in their best interest.