So you have been named as financial Power Of Attorney (POA) by a loved one? Congratulations! It is an honor and privilege, but it is also important to understand your responsibilities before you agree to take on the role.
Serving as financial POA for a loved one isn’t just about money management for your loved one—it’s about making the hard choices and doing what’s best for them, even when it feels uncomfortable.
If you’re a child or potential heir, this can be especially challenging because it might mean making financial decisions that reduce your own inheritance. But being a POA comes with a fiduciary responsibility, meaning you’re legally and ethically bound to act in their best interests—no exceptions.
Let’s talk about what this really means, how to handle difficult family dynamics, and how to navigate financial decisions when dementia is involved.
What Does “Fiduciary” Mean, Exactly?
In simple terms, a fiduciary is someone trusted to manage another person’s finances with a legal obligation to always act in their best interest. As a financial POA, you’re expected to:
- Make responsible choices (pay bills, manage investments, protect assets)
- Keep THEIR best interests at heart (not yours, not your siblings’, not anyone else’s)
- Act honestly and transparently (no secret transactions or side deals)
It’s a big responsibility, and mishandling it—even unintentionally—can lead to accusations of financial abuse or fraud, which can have legal consequences for you if found to be true. But more importantly, it can harm the very person who trusted you.
Being a Fiduciary for a Parent: Making Choices That May Shrink Your Inheritance
If you’re a POA for a parent, chances are you’ve thought about what will happen to their assets after they pass. Maybe they’ve talked about leaving you something, or maybe you’re just hoping there’s enough left for a little financial cushion.
Either way, when you step into the role of POA, their needs have to come first, and that can mean spending down assets for care rather than saving money for heirs.
For example, let’s say your parent needs skilled nursing care for an extended period of time. Medicaid won’t kick in until they’ve spent down a certain amount of assets, meaning their savings might go toward their care instead of being passed down. At over $100K per year for skilled nursing care, it is easy to see how a lifetime of assets can be depleted quickly.
It’s tempting to look for ways to preserve those funds—but legally and ethically, that’s not your priority except to the extent they have already laid out with a Medicaid plan put in place with an attorney. Your job is to use their money to take care of them, period.
Some POAs struggle with this and may unintentionally make bad choices, like:
- Delaying necessary care to hold onto assets
- Using a parent’s money for their own expenses
- Not reporting finances properly to government agencies
Even if you think you’re helping, making these kinds of financial decisions can lead to serious legal trouble and put your loved one at risk.
Serving as POA for Someone with Dementia
Managing money for someone with dementia comes with its own set of challenges. They may insist on being involved, even when their cognitive abilities are no longer strong enough to make sound financial choices.
Common issues include:
- Impulsive spending (writing large checks, giving money away)
- Falling victim to scams (fraudulent charities, fake investment opportunities)
- Insisting on managing their money themselves (even when it’s clear they can’t)
It’s heartbreaking, because you want to honor their independence, but you also need to protect them.
For example, if your mom or dad starts writing checks to strangers or signing up for expensive subscriptions they don’t need, it’s your responsibility to intervene. That might mean restricting their access to bank accounts or setting up financial safeguards to prevent reckless spending.
Of course, this can lead to hard conversations. They may feel like you’re taking away their control, or even accuse you of trying to “steal” their money. But remember—your role isn’t to make them happy in the moment, it’s to ensure their long-term financial well-being.
This is a delicate balance. Remember, just because someone is making bad decisions does not necessarily mean you have the authority to intervene. POA authority can be granted based on different criteria, so make sure you have the POA document and consult with an attorney to understand when that authority kicks in.
In some cases, a doctor may have to declare that the person is not competent to make their own decisions before POA authority applies, and in other cases that may not be required. In any case, once your responsibility as POA is in force, it requires that you act as a fiduciary on your loved one’s behalf.
In these situations, it can also be helpful to get creative and try to think of ways you can give them as much independence as possible without compromising their physical, financial, mental, or emotional well-being. For example, maybe the parent can still have access to a debit card that has limited funds available or allows you to control where money can be spent, while the bulk of their assets are in an account they cannot access.
Family Drama & POA Responsibilities
If you have siblings or other family members involved, things can get messy. Disagreements over money can spark major conflict, with some family members pushing for certain financial decisions that benefit themselves rather than the person you’re representing.
To keep things as smooth as possible:
- Be upfront about financial decisions – Share what’s happening and why
- Keep records – Document every transaction and expense
- Consult professionals – Bring in financial or legal experts if needed
- Set boundaries – Don’t let relatives pressure you into doing things that aren’t right
At the end of the day, your duty is to your loved one, not your siblings, not your inheritance, not anyone else’s opinions.
Being a Fiduciary Is About Doing the Right Thing
Being a financial POA isn’t easy. You’re making decisions that directly impact a person’s life, and sometimes those decisions might feel frustrating or unfair—especially if you’re watching money disappear that might have otherwise been passed down. But ultimately, your job is to do what’s best for them.
If you’re ever feeling stuck, lean on experts—financial advisors, daily money managers, elder care specialists, attorneys—who can help ensure you’re making the right choices.
It’s an act of love, trust, and integrity, and when done right, it can give your loved one the security and dignity they deserve.
At Advocate Money Management, we provide coaching for clients who are serving as financial POA for their parents or loved ones. If you’re feeling stuck and need help navigating the realm of serving as financial POA for a loved one, contact us for a free consultation to see how we can help you!
With a little education and a lot of compassion, we can create a safer, more understanding world for everyone—especially those who might feel left behind in this fast-paced, digital age. Let’s work together to turn technology into a source of empowerment, not confusion.
Have you served as financial POA for a loved one? How did it go? What challenges did you have? Share your experience with our readers in the comments!
Check Out These Related Resources
- Navigating the Maze: Estate Planning vs. Medicaid Planning
- Recognizing Signs of Elder Abuse
- Set Up For Success: Getting Started Managing Aging Parents’ Finances
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