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I have been asked to step in, where do I start?
 

SITUATION: My parents named me to be the Trustee and personal representative. I never took the time to learn what my responsibilities would be. My mother was living home alone and doing very well while my father had moved to a nursing home due to Alzheimer’s. My whole family was shocked when my mother died suddenly. All of my siblings are coming to me for money now and I don’t know what to do.

To give you peace of mind, you are not alone in your circumstances. Altogether too often, there is no planning in the event the well parent dies before the ill parent. This puts you in an awkward position as your siblings may be afraid all the money will be spent on the nursing home. As the personal representative and trustee, you’re a fiduciary who is responsibility to all parties. You typically don’t have the right to transfer money from your father’s estate to your siblings.

  • The first thing you should do is to gather all of the financial records you can find.  This would include statements of income and expenses, assets and liabilities, insurance policies and their statements, income tax returns, and their supporting documents, as well as Wills, Trusts, and other legal documents.
  • Create a projection of the expenses your father is likely to experience over three to five years.  Determine all the sources of income such as pensions, social security, and any other regular income source.  If the income is not enough to cover the expenses, determine the monthly amount of principle you will be required to spend on your father’s care.
  • Determine the amount of annual tax you will be required to pay.  Seek out ways to pay the deductible expenses with income distributions from retirement plans as they may offset one another.  A transfer plan could be created with the advice of a qualified professional if the assets will last more than five years.  Be very careful because you could be held criminally liable if you try to take action to preserve money without getting proper counsel in advance.

What are the duties of a health or financial POA?

 

SITUATION: My parents have asked me if I could be listed as their health care and financial POA. What is the difference between these two and what could I be called upon to do.

Many people list children or friends to serve in these roles without informing them. You are fortunate to have been asked rather than to just be named in a document and not even know you may have a future role in the life of your parents. These are two very different documents that need to be described individually.

  • The HCD is a document that grants authority to make medical decisions on behalf of the principle “person who created the document”.  The principle describes the level of care that they desire based on various types of medical situations.  The medical facility will respect the orders given by the HCPOA as though they were given by the principle.  It is typically recommended that a family utilize a document provided by their attorney rather than the medical facility.  The document must also properly address the rules of privacy created by HIPPA.  The duties of the HCPOA is to give instructions to the medical providers that they will follow.  The HCPOA is responsible to know the wishes of the principle.
  • The financial POA is a document that grants another person the authority to act as the principle in any and all financial matters.  The only limits put on by the POA are that the POA cannot alter the estate plan and cannot cause the principle to be entered into a marriage contract.  The document does not provide “ascertainable standards” and therefore often called the most abused legal document.  The typical duties of the financial POA are to gather income, pay expenses, manage investments, and liquidate properties as needed to properly run the affairs of the principle.

What is my liability if I make a mistake?

 

SITUATION: Should I be worried that taking action as a POA or trustee could result in liabilities that could cost me money?

Yes. When acting in these roles, you are acting as a fiduciary. A fiduciary is required to put the interests of others above themselves. Losses could occur as a result of theft, poor investments, or simply making a mistake. Saying you are sorry does not reduce the liability that is created by those mistakes! It may be beneficial to buy insurance or to use a professional to assist you if you have been asked to serve in these roles.

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Check the background of this financial professional on FINRA's BrokerCheck