Dear Len & Rosie,
After my father’s death, my mother gave my brother Stephen a durable power of attorney. Mom was never all that good with finances, and all of us agreed that it would be better for Stephen to take care of things in case anything bad happened to her.
Now I am wondering if my brother has exceeded his authority. He borrowed almost all of her life savings, over $32,000, to keep his home out of foreclosure.
Stephen signed a note for the money and agreed to pay interest at 10% per year. Mom has since reduced the interest to 7%. The problem is that she does not even know how much money Stephen pays each month, because he handles all of her finances. Mom hasn’t seen a checkbook or account statement for years.
I don’t know what I can do. Mom hasn’t got Alzheimer’s or anything and she seems happy with Stephen handling her money. I don’t know if I should sue or just leave it alone.
Stephen, as attorney-in-fact, has a very strong legally imposed fiduciary duty to your mother. Unless the power of attorney your mother signed specifically authorizes him to self-deal, he cannot loan himself your mother’s money. Of course, if your mother told him that it was OK to borrow the money, than it is perfectly legal.
An interest rate of 10%, or even 7%, is downright generous these days. Your mother is making more interest from Stephen than if she kept her money in a certificate of deposit, assuming that Stephen is making the payments like he promised. The fact that he asked your mother to reduce the interest rate implies that he is making payments. If he’s lying about it, why would he bother renegotiating the loan?
You said that your mother seems happy with the way that Stephen is handling things and that she even agreed to lower the interest on the money he borrowed. This is a free country and a competent person can do anything she wants to, even if it is not in her best interests. Still, you should talk to your mother. Make her aware of what you think is going on, and have her ask Stephen to give her the account statements showing his payments and what he’s doing with her money.
Then step back to see what happens. Hopefully everything is above board. If it isn’t, or if Stephen refuses to show your mother the books, then she should fire him. As long as your mother is still in possession of her faculties, she can revoke the power of attorney at any time. Should your mother sue Stephen if he isn’t making payments? Most parents don’t want to see their children get in trouble, no matter what they do. But if your mother is willing to go the distance, she should consult with an attorney and consider suing her son for a breach of fiduciary duty.
Len & Rosie
Dear Len & Rosie,