As your parents get older, you may want to do what you can to help them manage their finances. One of the ways you can help your aging parents protect their financial interests is by setting up a power of attorney. Becoming your parents’ attorney in fact will allow you to better assist them in protecting the wealth they’ve accumulated.
Understanding Your Role as Attorney in Fact
As an attorney in fact under a power of attorney executed under Washington law, you can act on behalf of the principal – the person who executed the power of attorney – within the scope of authority described in the document. Although an attorney in fact cannot act contrary to the principal’s wishes or instructions, they can make decisions or take actions as if the principal had made them.
In a financial power of attorney executed by your parents, your role as attorney in fact may include various tasks, such as:
- Managing your parents’ finances, including managing investment portfolios
- Paying household expenses, such as property taxes, mortgage payments, and utility bills
- Handling real estate, including overseeing real estate transactions when your parents decide to move or downsize
Furthermore, state law imposes fiduciary duties on attorneys in fact, requiring them to act in the principal’s best interests, avoid self-dealing or usurping property belonging to the principal, and make prudent decisions.
Knowing What Authority You Have and Don’t Have
When your parents make you their attorney in fact under a power of attorney, you should review the POA document carefully to understand the scope and duration of your authority. Your parents may have created a limited power of attorney, which only authorizes you to handle certain financial matters on their behalf. They may have also established a “springing” POA, which only becomes effective if your parents become incapacitated. You should also check whether your parents have created a durable power of attorney, which continues your authority as attorney in fact if your parents become incapacitated.
Asset Protection Strategies You Can Use
Depending on the scope of authority granted to you by your parents’ power of attorney, some of the asset protection strategies you can help them implement include:
- Transferring assets to trusts, including irrevocable and Medicaid trusts
- Converting countable assets into exempt resources, such as Medicaid-compliant annuities, to help your parents qualify for benefits to pay for long-term care
- Updating beneficiary designations for retirement accounts, pensions, or life insurance policies
- Facilitating gifting strategies to distribute wealth to family members
You should sit down with your parents to discuss any asset protection strategy before you implement it. Otherwise, family members or the court may view undertaking financial transactions without their knowledge as financial abuse.
Complying with State Law
Acting as your parents’ attorney in fact will also require you to comply with Washington’s Uniform Power of Attorney Act, which governs the creation of powers of attorney and the ability of attorneys in fact to execute their duties. As an attorney in fact, you should also keep detailed records of financial transactions you take on your parents’ behalf. Furthermore, some transactions, such as large gifts or alterations to estate planning documents, may require you to seek court approval.
Other best practices to keep in mind when serving as an attorney in fact for your parents include maintaining open communication with your parents and other family members and taking a proactive approach to asset protection rather than waiting for a crisis to occur.
Contact an Estate Planning Lawyer Today
Becoming your parents’ attorney in fact can allow you to protect their assets and financial interests as they get older. Contact ELG Estate Planning today for a confidential consultation with an estate planning attorney to discuss how you can best serve your aging parents’ needs as an effective attorney in fact.