Q: My dad is 90 and my mom is 87. They are no longer capable of h handling their own affairs. I have been asked to take over as power of attorney by their friends. My only problem is, I have federal tax issues dating back ten years. Is there a risk that the IRS could get my parents life savings if I become their power of attorney? (Pittsburgh, PA)
A: The short answer is no. Generally, when acting as an Agent for the Principal under the legal parameters of a Power of Attorney, the Agent is acting in a fiduciary position and is not personally liable. The Agent should have not personal liability for the debts and expenses of the Principal. The Principal’s assets should not be subject to claims of the Agent’s creditors. It is only when the Agent acts outside the scope of his authority of the POA or acts illegally, can the Agent be subject to personal liability.
Q: I am investing my money (trying to grow it beyond being in a regular savings account) and my mom has around $10K that she would also like to add to my money but we are afraid it may raise red flags with the IRS. The transition would be from one bank to a different bank. Also, I am in Pittsburgh, she is in South Carolina. (Regent Square, Pittsburgh, PA)
A: I think you should ask the bank you plan on depositing these funds in to. My recollection is that businesses must fill out an IRS form for every check or cash in the amount of $10,000.00 or over. I believe banks only report deposits from individuals to the IRS if it is cash or of a suspicious nature. These types of deposits occur frequently and the bank doesn’t like to turn in their own good customers. Another consideration is Federal Gift Tax. This amount is under the Federal Gift Tax limit and therefore there would be no concerns regarding your mother’s income taxes. Also, you may want to consider the potential consequences of this transfer if mom needs to apply for Medicaid in the next five years. If she does, this transfer may be render her ineligible for the value of the transfer to you.