Recordkeeping for someone with power of attorney or guardianship

| Apr 7, 2020 | Firm News

If someone named you as their financial power of attorney or if the court appointed you as guardian to an adult who cannot provide for their own needs, you have a lot of responsibility. Not only do you have to continue to manage your own affairs, but you will have to make necessary financial transactions on behalf of another adult.

Your obligations could range from paying mortgage, taxes and utilities to liquidating assets in order to cover the costs of medical care or a room in a nursing home. Regardless of what financial obligations you perform on behalf of someone else, it is of critical importance that you keep very careful financial records.

Document every transfer, payment and distribution, regardless of how small

At first glance, the $20 you take from the household bank account to pay the neighbor who mows the lawn may not seem significant, but that money adds up over the course of the summer. While it may only be a few hundred dollars, that is a few hundred dollars unaccounted for in the situation where you have a fiduciary duty as a guardian or agent.

Fiduciary duty involves an obligation of trust between you and the person on whose behalf you act. Essentially, you have a legal obligation to act in their best interest, not your own. If you can’t prove that you didn’t pocket the money you used to pay for lawn care, you could wind up having your position as guardian challenged or facing financial consequences from family members or even the individual whom you were acting to protect.

What kind of documentation do you want to keep?

Having multiple forms of documentation for each expense is ideal if possible. Bank statements, credit card statements and similar documents from financial institutions can verify the balance of the account and where you used funds. Billing statements from companies and the receipts they provide are also of critical importance.

For situations like the aforementioned neighborhood lawn care entrepreneur, getting a receipt book from an office supply store and having the young person sign a receipt acknowledging their payment of $20 each week will give you a trail of documentation that verifies you spent funds as required to maintain the household or as requested by the person on whole behalf you act. Reviewing the documents and going over the transactions you’ve made annually can help you avoid mistakes and oversights.

It is always better to have more documentation and records than you need than to not have adequate receipts when the time comes. Careful recordkeeping can validate that you have always acted in the best interests of the other party and upheld your fiduciary duty.