Learn rules on power of attorney
Barbara Smith appointed her daughter Debbie to handle her financial affairs if she ever became unable to do so herself. That was done by a power of attorney document her lawyer prepared. In April of 2010, Barbara became mentally incompetent. Her daughter took over Barbara’s finances.
A person handling financial affairs for another under a power of attorney is called an “attorney.” In legal language, Debbie was serving as the attorney for her mother.
While Debbie might have tried her best, she ended up making mistakes. By the time everything was done, Debbie spent two years battling with her family in court. She lost the case and was removed. She also had a judgment registered against her and had to pay damages.
Debbie kept poor records. An attorney is expected to keep detailed daily records of all financial transactions that take place. She did not. She was not an accountant by training, and figured it was all in the family and that it was OK to keep informal records. An attorney is forced to produce those records on demand. If they have not been kept, the attorney can be forced to work backward and reconstruct them.
When her brother wanted to know what was going on, she told him to mind his own business. Debbie was obliged to keep her mother’s affairs confidential, but it would have been wise to find some way to accommodate him. She could have applied to court and “passed accounts.” That would have allowed her to be release information under the supervision of the court.
Debbie also received some bad advice from a lawyer and violated one of the fundamental rules that apply to a person when he or she is handling money for another person. The lawyer told her she could take the sum of $250,000 as a “pre-inheritance” and take a reduced share of her mother’s estate to even things up later on, after her mother had passed away.
There were some complicating circumstances and the advice might have been based on a misunderstanding of the facts. The rule is this: an attorney has to act in the exclusive best interest of his or her incapacitated ward. The courts treat that as sacred. If you’re serving as someone’s attorney you will want to be very careful. You owe it to yourself to learn the rules and to the person you are helping to abide by them.