Choosing a Trustworthy Financial Agent

A power of attorney is a legal paper. It lets one person act for you. The person you name is your agent. In a financial power of attorney, your agent can pay your bills. Your agent can use your bank accounts. Your agent can act on your money and your home.

That is a lot of trust to give one person. The Consumer Financial Protection Bureau, or CFPB, puts it in plain terms. A power of attorney gives your agent a great deal of power over your funds, with no regular check from a court. So the choice of agent is the most key choice in the whole paper. Pick with care, and pick while you can still think it through.

This guide is part of our Aging at Home hub. If the words in these papers are new to you, start with our guide to durable power of attorney and what the terms mean. If you want to know what a court may do when no agent was named in time, see our guide to guardianship, conservatorship, and other paths to explore.

Key takeaways

• Your agent is a fiduciary. The law says your agent must act for your gain, not for their own gain.
• The CFPB lists four duties for an agent: act only in your best interest, treat your money with care, keep your money apart from theirs, and keep good records.
• Pick a person who is calm with money and will show their records when asked.
• Put safeguards in the paper. You can ask your agent to report to a third person on a set schedule.
• State laws on these papers vary. A lawyer in your state can check your paper.
• Medicare and Medicaid do not pay for legal papers or for an agent's work. Most families pay on their own, or use free legal aid.

What a financial agent does

In the paper, you are the principal. The person you name is the agent. A second name for agent is attorney-in-fact. That name does not mean the person is a lawyer. It just means the person can act in your place.

Your agent may pay rent, bills, and tax bills on time. Your agent may put checks in the bank and take funds out for your needs. Your agent may deal with the bank and sign forms about your money or home, if the paper allows it.

The paper sets the limits. Your agent can do only what the paper says. Read those limits with care before you sign.

A financial power of attorney can help you plan for a time when you cannot act for yourself. The CFPB notes it can be used when a health change, such as dementia or a brain injury, makes it hard to make sound choices about money. When a paper is made to last through such a time, it is called durable. It stays in force even if you can no longer make choices on your own.

The four duties your agent takes on

When you name an agent, that person takes on legal duties. The CFPB wrote a full guide for agents, called Managing Someone Else's Money. It lists four basic duties for a fiduciary. A fiduciary is a person named to handle money or things for someone else.

The four duties are:

Those four lines are a good test for your choice. Will the person put your needs first? Will they keep your funds in your name, in your own accounts? Will they write down each bill paid, so you can check the list later? If the answer to any of these is no, keep looking.

The CFPB guide also says state laws vary. Your agent may have more duties under your state law. The guide is not legal advice.

• Act only in the best interest of the principal.
• Handle the principal's money and things with care.
• Keep the principal's money and things apart from the agent's own.
• Keep good records.

Traits to look for in an agent

Good agents share some clear traits. Look for a person who pays their own bills on time and lives within their means. Look for a person who keeps neat records and can find a past bill fast. Look for a person who tells the truth, asks for help when a task is too big, and knows your wishes and the things you value most.

Kinship alone is not enough. Your oldest child may not be the best pick. A friend with a calm head and neat files may do a far better job. Pick the person, not the title.

Also ask the person first. Do not surprise them with the job. Talk about what the job asks and how long it may last. A person who says yes with open eyes will do far better work.

Questions to ask before you name someone

Ask if the person will keep your money apart from theirs at all times. Ask if they will keep records you can check, and share them when you ask. Ask what they will do if they cannot do the job one day. Clear, calm replies are a good sign. Vague replies are not.

Name a backup agent too. Your first pick may move, get sick, or die before you do. A backup named in the paper can step in with no court trip. Tell both people who the backup is, so there is no shock later.

Red flags to watch for

The CFPB warns that abuse of a power of attorney can take many forms. Watch for these signs:

One sign may have a fair cause. A pattern of signs does not. Trust what you see, and act soon.

• The person pushes you to give them more power than you want to give.
• The person spends your money on things for themselves, not for you.
• The person does things you did not allow, such as gifts to themselves or changes to who gets your funds when you die.
• A new "best friend" shows up and wants to take charge of your funds. The CFPB says to be wary of such offers. If help sounds too good to be true, it most likely is.
• The person will not show you records, bills go unpaid, or the person tries to keep you apart from family or your bank.

Put safeguards in writing

You do not have to rely on trust alone. You can build checks into the paper itself. The CFPB gives this tip: tell your friends, your family, and your money advisers that the paper exists. Then they can look out for you. They can also spot a fake paper if one shows up.

Talk through more safeguards with a lawyer. You can ask your agent to report to a third person, such as a sibling, on a set schedule. The CFPB notes you can put this rule in the paper. You can limit the paper to the tasks you need, and state if your agent may make gifts. Keep a copy in a safe place, and review the paper each year.

And know this: the choice is not set in stone. The CFPB is clear that you can change or revoke your paper. If your agent is no longer the best person for the job, you can cancel the paper and name someone new, as long as you can still make choices for yourself. Do that in writing, and tell your bank and your family at once.

If no agent is named in time

There is a cost to a late start. The CFPB notes that if you do not make a power of attorney in advance, a friend or family member may have to go to court to have a guard named for you, if you can no longer make choices. That court path can be long and costly, and it is not private. Our guide to guardianship, conservatorship, and other paths to explore walks through when that path may be the right one. But a well made paper, with a well picked agent, lets you keep the choice in your own hands.

What to do if trust breaks down

If you think an agent is misusing your funds, act fast. You do not have to prove the whole case on your own.

First, if you can still make choices, revoke the paper in writing. Tell your bank in writing too, so the bank knows the old paper is dead. A lawyer can help you do this in a way your state accepts.

Next, report what you see. The CFPB guide on elder financial abuse says to contact Adult Protective Services and law enforcement first when you suspect abuse of funds. Adult Protective Services, or APS, is a state program. APS serves older adults and adults with health limits who need help due to abuse, neglect, or misuse of their funds. The guide points readers to the National Adult Protective Services Association site to find the local APS office.

You can also tell your bank what you fear. And keep your own notes: dates, sums, and names. Good notes help each office you call.

Who covers what

• Medicare: Medicare does not pay for legal papers, such as a power of attorney. Medicare does not pay for the work your financial agent does for you. Those are legal and private costs, not health care costs.
• Medicaid: Medicaid does not pay for legal papers or for a financial agent's work either. Medicaid helps with health care costs for people with low income. It is not a source of funds for legal forms or agent fees.
• Private pay: most families pay a lawyer out of pocket to draft or review a power of attorney. The CFPB notes that help from a lawyer to name an agent is fairly low in cost when set next to the risk of a bad paper. If you cannot afford a lawyer, free legal aid may help. Legal aid offices are not-for-profit groups that give free legal help to people who cannot afford a lawyer. LawHelp.org lets you pick your state and find aid offices near you. Your local Area Agency on Aging may also give free or low cost legal help to adults age 60 and up. See our guide to finding elder law help and low cost legal services.

Sample Situation

Ana is 76 and lives on her own. Her health is fine, but she wants a plan in case that changes. Her son Marco asks to be her agent. He means well, but he is late on his own bills and keeps poor records. Her niece Rosa pays her bills on time, keeps neat files, and has helped Ana with tax forms for years. Ana talks with both of them in plain terms. She names Rosa as her agent and Marco as the backup. At her lawyer's office, Ana adds a rule to the paper: Rosa must send a short report of each month's bills and bank acts to Marco. That way, two people see the funds, and Marco stays in the loop. Ana tells her bank about the paper and keeps a copy in her desk. She feels calm. The choice was hers, and the checks are in writing.

Your next step

A good agent is one part of a sound money plan. When you are ready to look at what care may cost, and who pays for each kind of care, our guide to paying for care walks through the main choices, step by step.