A power of attorney is a powerful document posing some danger to the holder. It is common to receive a power of attorney from an aging parent or relative in order to help them handle their personal affairs. In effect, it allows the holder to stand in the shoes of the giver and act as though he or she was that person as far as the outside world is concerned, but a world of trouble lies in wait for the unfortunate who fails to properly use the power.
A power of attorney creates a fiduciary relationship with fiduciary responsibility. There is no statute of limitations to cut off rights against one who has breached a fiduciary duty (In New York, the only other open ended statute of limitations applies to homicide!). The power imposes the duty to protect and conserve the assets of the giver and to treat them with the utmost of care. For example, putting Mom’s money into a certificate of deposit or a reputable brokerage account is fine but investing in chocolate-covered cotton futures would probably be frowned upon in most places.
The real problem comes when Mom is gone and fights break out between siblings as to who gets the fur-lined table lamp and who Mom loved best. That is when the siblings who did not hold the power of attorney demand that the holder of the power account for how it was used. Failure to properly account can lead to a court imposing a surcharge for any funds which cannot be shown to have been properly spent.
Assuming that you always used the power appropriately (paying the electric bill and making the car payment and the like), you will still need to be able to prove that you did.. When handling someone else’s affairs with a power of attorney, keep records, records, and more records. Keep paper copies of all of the bank statements together with all of the checks. Some bank accounts do not provide copies of checks. Make sure you are not using such an account and that you have all of your check copies together with the invoices that you paid with them. A check to the electric company needs to be kept with a bill for Mom’s electric bill so that no one can suggest that you paid your own bill. In this technological age, it is a good idea to back up those paper statements by scanning the bills, checks and bank statements into your computer and storing them both on your hard drive and in the cloud.
Remember that banks commonly purge records after seven years. Good luck getting copies of stuff from beyond that time. Anybody with an interest in your Mom’s estate can demand that you provide them with a formal accounting. This might be a brother or sister or the child of a deceased sibling.It could also be a creditor, or even Medicaid checking up to make sure that there were no irregularities in your parent’s account. You can be required to account back to the date your power was given –some accountings may go back a generation or more! With that in mind, the combination of guidance from a good lawyer or accountant and good record-keeping should be your watchwords.