Holder of Power of Attorney's Duty to Account

Oftentimes when people get older and they can feel their mental capacity diminish they will sign over control of their financial machinations to someone they trust. Unfortunately, because of their diminished mental state they don’t realize when that person they trust is in fact taking advantage of them.

Thankfully, the legislature enacted duties for the holder of the power of attorney found in Probate Code section 4236. They must actively keep records of all transactions they enter into on behalf of the person who gave them the power of attorney. While that is not the same as a duty to provide an annual accounting, like what is required for Trustees, it does create an affirmative duty to at least keep a paper trail.

Now, importantly, the holder of the power of attorney must prepare an accounting when requested by the individual that gave them the power of attorney or that person’s personal representative after they die. While this doesn’t sound like much of a duty, it allows you to easily recover for wrongful conduct the holder of the power of attorney conducted—as long as who had access to various financial accounts is clearly delineated.

Unfortunately, most of the time when someone gives another person the power of attorney, they will also give them other hats to wear, including being the trustee of their trust. Commonly, the person makes all of their financial joint accounts to “make it easier” on the holder of the power of attorney. However, all that does is allow the holder of the power of attorney to argue that any improper transaction was done in their personal capacity and not as the power of attorney.

For that reason, it becomes incredibly difficult to prove the actual damage once you let the fox into the hen house. That is why it is advisable to not put any holder of a power of attorney on your account as a joint account owner, to give them a separate debit card/credit card to access your accounts, and any other method to distinguish their transactions from another person’s transactions.

While it is difficult to think of someone you trust as taking advantage of you, something to keep in mind is that oftentimes the bad actor doesn’t think of themselves as such. They don’t think they took advantage even when they objectively did. And because the person they are taking advantage of isn’t really in a position to push back on them, in their mind, their conscience remains clear. That is why it is important to set up safeguards ahead of time, and not blindly trust another person.