When someone names you as their agent under a financial power of attorney, they are placing a great deal of trust in you.

You may be able to access bank accounts, pay bills, handle investments, deal with real estate, and make other important financial decisions.

But there is something every agent needs to understand:

It is still their money, not yours.

A recent Michigan Court of Appeals case, In re Estate of Janie B. Sanders, is a good reminder of what can happen when an agent crosses that line.

Why This Matters

Janie Sanders suffered a stroke and later developed dementia. She eventually moved into a nursing home.

Before that, Janie had named her niece, Cynthia, as her agent under a Durable Power of Attorney. A Durable Power of Attorney allows another person to handle financial matters for you, including during a time when you can no longer handle those matters yourself.

Over time, Janie’s family began noticing questionable activity involving her money.

Among other things, money was removed from Janie’s savings and placed into an account in Cynthia’s name. Janie’s money was used to insure a vehicle she could no longer drive so her grandson could use it. There were also questionable credit card charges, including expensive Louis Vuitton handbags.

The problem was not simply that Cynthia had access to Janie’s money. She did.

The problem was how that authority was used.

Janie’s power of attorney specifically prohibited gifts. It also placed limits on what Cynthia could do with Janie’s accounts.

The Wayne County Circuit Court found that Cynthia breached her duties and converted some of Janie’s property. The Michigan Court of Appeals agreed. The judgment against Cynthia was more than $41,000, plus attorney fees and costs.

The case is an important reminder that being named as an agent under a power of attorney does not give someone unlimited authority.

Michigan’s Recently Changed Power of Attorney Law Makes These Duties Even Clearer

The events in this case happened before Michigan’s new Uniform Power of Attorney Act took effect on July 1, 2024.

The new law makes an agent’s responsibilities very clear.

An agent generally must act in the person’s best interests, act in good faith, stay within the authority given in the power of attorney, and keep reasonable records of money received and spent.

The agent must also act carefully and loyally for the person who gave them the authority.

That last part is important.

If Mom names you as her agent, you are managing Mom’s money for Mom’s benefit.

You are not managing family money.

You are not deciding what Mom “probably would have wanted.”

And you do not automatically have the right to make gifts to yourself, your children, or anyone else.

Your authority comes from the power of attorney and Michigan law. You have to stay within those boundaries.

Good Recordkeeping Matters

There is another practical lesson here.

Keep records.

If you are paying Mom’s bills, keep track of what you paid. If you reimburse yourself for something you purchased for her, keep the receipt. If you transfer money, be able to explain where it went and why.

Michigan’s current law specifically requires an agent to keep reasonable records of financial transactions made on behalf of the person.

This protects the person whose money you are managing.

But it also protects you.

Years later, another family member may question what happened. Good records can show exactly what you did and why.

The Consequences Can Be Serious

Michigan’s current law also gives courts meaningful remedies when an agent misuses another person’s property.

An agent who violates their duties can be required to restore the value of property that was lost because of the violation.

And in some cases involving embezzlement or wrongful conversion of property, the financial consequences can be much greater—including liability for three times the value of the property involved.

That is why serving as someone’s financial agent should never be treated casually.

It is an honor to be trusted.

It is also a serious responsibility.

Simple Lesson

A power of attorney gives you authority to help someone. It does not give you ownership of their money.

If you are serving as an agent, stay within the authority you were given, put the person’s interests first, and keep good records.

Action Step

If you are currently serving as someone’s agent under a power of attorney, take a few minutes to review the plan and make sure you understand exactly what you can—and cannot—do.

And if you are creating or updating your own estate plan, choose your financial agent carefully. Pick someone you trust not only to manage money, but also to respect the responsibility that comes with the job.

 

If this topic raises questions for you or your family, feel free to call (517) 548-7400 or contact us online: https://www.michiganestateplans.com/contact-us