Wednesday, May 11, 2011

If I control my mother's money, am I liable for her debts?

Let’s get this clear. If you become a conservator for your mother, or her guardian, or her agent on a power of attorney, you do not become responsible for your mother’s debts. If you are a guardian or a conservator your activities are closely regulated by the courts and you should consult with your attorney. If your mother has made you her agent by signing a power of attorney, you are entitled to act on behalf of your mother, without becoming personally liable for her debts, as long as you fully disclose that you are acting on her behalf.

If your mother has appointed you her agent by signing a power of attorney, you are now empowered to make purchases for her and enter contracts that bind her. If you hire a mechanic to fix her Camaro and the mechanic doesn’t get paid, the mechanic can sue your mother, but not you. This rule is subject to two conditions. The first is that you fully inform the mechanic that you are acting on behalf of your mother pursuant to the power of attorney. The second is that the work on the Camaro must truly be for your mother. If you hid the fact that it was your mother’s Camaro and that the work was because she had a big race coming up, the mechanic could reasonably believe that you were hiring him, and he could then sue you. Similarly, if you told him the work was for your mother, but your mother couldn’t drive and you were the one with the upcoming race, then the work was not really for her--it was for you. The mechanic can sue you.

The key to being an agent pursuant to a power of attorney is to understand that the money you are handling is not your own and that everything you do must be done for the benefit of the person who signed the power. You can’t take the money for yourself or buy things for yourself. You can’t give it to your Aunt Millie or to the Red Cross. If you buy something or hire somebody, the thing or the service must benefit the person who appointed you and not benefit you. If you follow this rule and let everybody you deal with know that you are acting on behalf of another, you will never end up personally liable for paying the debts of the person who appointed you.

1 comment:

  1. What about IRS debt? I have Power of attorney for my father's finances. He still has them prepared by a tax service. Must I go in with him to inform the preparer that I have power of attorney on his behalf to prevent myself from being liable for his tax debt?