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Can a power of attorney transfer money to themselves?

Can someone with power of attorney transfer money to themselves? Read on for the answer and everything else you need to know.

evident Editorial Team
May 27, 2023
Dollar bills covering table

A power of attorney is an important legal document in a comprehensive estate plan and gives the designated agent broad authority to manage the principal's legal and financial matters. But can a power of attorney transfer money or other assets to themselves?

Generally speaking, a power of attorney cannot transfer money to themselves except in limited circumstances and with express authorization.

In this article, we'll cover the basics of powers of attorney, the duty owed by a power of attorney agent, and answer whether they can legally transfer money to themselves.

Key Takeaways

Power of Attorney (POA) – Overview

A power of attorney (or POA for short) is a legal document that gives another person the legal authority to act on your behalf. When you (the principal) sign a power of attorney form, you give another person (known as the agent or “attorney-in-fact”) the authority to act on your behalf regarding things like your finances, property, or health care decisions. 

There are multiple kinds of POAs that give the agent varying levels of control over a principal's affairs.

Types of Power of Attorney

There are several types of power of attorney based on the scope of authority granted. Examples include:

  • General Power of Attorney – The agent acts on behalf of the principal on all legal and financial matters. This means the agent can manage the principal’s bank accounts, sell their assets, manage their government benefits like Social Security, and make decisions about their healthcare.
  • Special Power of Attorney – The agent’s power is restricted to specific matters. ou could authorize an agent exclusively to manage a bank account or execute specific financial transactions. Under this type of POA, an agent would have no authority over the principal's other affairs.
  • Financial Power of Attorney – The agent can manage financial matters on the principal's behalf. This is a type of special POA. 
  • Medical Power of Attorney - The agent has the authority to make medical decisions if the principal cannot make their own decisions. (For instance, if they are in a coma).

Powers of attorney can also vary in terms of when they are valid. A critical distinction is between a durable power of attorney, which remains in effect if the principal becomes incapacitated, and a non-durable POA which does not.  

How long a power of attorney is good for depends on the type of POA and the details within the legal document. All powers of attorney, though, expire when the principal passes.

A power of attorney cannot transfer money to themselves for their own benefit

So, can a power of attorney transfer money to themselves for their own self-interest? No, an agent under a power of attorney has an obligation to act in the principal’s best interest. 

An agent will have broad authority to control the principal’s finances. They can pay the principal's bills and make financial decisions on their behalf, and they can interface with banks or other financial institutions on behalf of the principal. 

But the agent stands in a position of trust and owes a fiduciary duty to the principal, so engaging in self-dealing would be an abuse of power of attorney.  

Depending on state law, power of attorney abuse could create grounds for the agent to be criminally charged with theft, embezzlement, fraud, exploitation, money laundering, or another financial crime.  

If a power of attorney agent does transfer money to themselves inappropriately, then ideally, the principal can step in to revoke the power of attorney and seek to recoup the money. But a principal can only revoke a POA if they are of sound mind. If the principal lacks the mental capacity to change or revoke their POA document, then family members (or any other interested party) will have to seek to override the power of attorney in court. 

Could a power of attorney transfer money to their spouse or child? 

No, a power of attorney cannot transfer money to one of their family members out of self-interest. For all the reasons discussed above, giving money to their spouse or child would violate their obligation to act in the principal’s best interests and would be an abuse of power of attorney. 

If an attorney-in-fact transferred money to their spouse, or anyone else, in self-interest, then the same options would be available: the principal could revoke the power of attorney document if they are of sound mind, or interested parties could seek to override the POA in court. 

When could a power of attorney transfer money to themselves?

There are certain circumstances in which a power of attorney could legally transfer money to themselves, particularly if there is express authorization from the principal. 

Here are some scenarios in which a person with power of attorney could transfer money to themselves:

  • Compensation for their services – Acting as an agent under a power of attorney can be a lot of work, so principals may provide compensation for the agent within the power of attorney document. If a principal wishes to compensate their agent, this should be made explicit within the POA form, and the agent should be diligent about documenting the time they spend fulfilling their duties as attorney-in-fact. 
  • Reimbursement for acting within the scope of their role – Similar to compensation for their services, sometimes an agent has to travel or incur other expenses incidental to their role as attorney-in-fact. It may be appropriate to seek reimbursement for some of these expenses, but again, the agent should diligently track and document any expenses for which they seek reimbursement.

So a person with power of attorney can transfer money to themselves in certain limited circumstances. But again, it must be for a proper purpose and with written consent from the principal, ideally within the original legal documents.

Keep in mind that as long as the principal is of sound mind, generally speaking, it should be relatively straightforward to confirm that they approve of the transfer. But if the principal has already been declared legally incompetent, it is all the more important for written consent to have already been given.

Selecting an agent

choice, select, decide

State laws vary, but there are typically only two requirements to be an agent. The agent must be:

  • Of sound mind, and 
  • At least 18 years of age. 

That said, it is critical to choose someone who you trust to carry out your wishes.

Clearly, naming someone to be your agent requires a great deal of trust. But even setting aside scenarios involving intentional misconduct, the decisions someone makes as your agent could have a huge impact on your financial assets and well-being. 

Trustworthy children are often a good choice for agents. And spouses are often selected as well, but remember that naming a spouse who is around the same age as you to be your agent can sometimes defeat the estate planning purposes of setting up a power of attorney. 

Professionals such as your attorney or accountant can also act as your agent, though they may charge fees. 

Whoever you choose, it is important to make the decision carefully and pick a trusted person who you are comfortable giving such great power over your legal and financial matters.

The bottom ine

So, can a power of attorney transfer money to themselves? In certain limited circumstances, an agent can transfer money to themselves for proper reasons and with express written consent from the principal. But an agent cannot transfer money or assets to themselves for their own benefit.

Agents are obligated to act in the principal's best interests, and any type of self-dealing would be an abuse of power of attorney. Remember that even when it may be appropriate for an agent to transfer money to themselves, it is crucial to maintain proper documentation should it be necessary to demonstrate the transfer was for a justifiable reason.

If you have questions about power of attorney documents, consider speaking with an estate planning attorney today.

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