Man laughing with his mother © iStock

Dear Senior Living Adviser,

My brother chose to use our mother’s savings account of $900,000 to buy land in Missouri and claims he is paying her more in interest than she was getting through the bank.

She is in a nursing home now and is 89 years old. He was named power of attorney because he lives closer, and I live 1,200 miles away.

Is this going to cause issues upon her death? She has a trust, but this activity is not part of it.

— Concerned Kevin

Dear Kevin,

Your brother, as the person with power of attorney to manage your mother’s finances, has a fiduciary responsibility to put your mother’s financial interests first. That encompasses more than just the interest he pays on the loan.

Since I’m not an attorney, I asked Linda Anderson of Anderson Elder Law to help me with your question. You will still need to seek counsel if you decide to act on this matter.

According to Anderson, “This is an interesting question and is an extreme variation on many typical family arrangements.”

She went on to say, “The financial power of attorney is where the analysis begins and will be determinative as to whether the brother acting as agent had authority as a fiduciary to engage in a transaction where he is also the borrower. All the terms of the loan are relevant, in addition to the interest. Is the loan secured, and what is the term of the loan? Obviously, these loan arrangements can wreak havoc not only on parents’ finances during life, but also skew the parent’s estate plan.”

Anderson feels it is “better to ask the hard questions now to avoid bigger problems later.” I agree with that outlook. It’s bound to create family strife, regardless of when these questions are asked, but asking them early may result in minimizing the financial issues while something can still be done about them.

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