Ethics of car buying

MichaelG · April 25

We put my parents in memory care months ago. Dad has a relatively new used car, while my car is getting old. I want to buy his car, in fact family and neighbors have told me I should. I am Dad's POA, so bill of sale will be between me as POA and me as me. Check will go from my account to parents' account which I use to pay for their care.

My question is: I'm inclined to just pay a nominal amount for Dad's car, like $1 or $100. Is that legal and ethical? Or do I have a responsibility to pay something more like market price, which would be in the thousands?

Thanks for any clarity.

Quilting brings calm · April 25

no it is not ethical. Nor is it in keeping with your fiduciary responsibility as POA. They deserve to be paid full price for their car as that money will go for their care. In addition, if they run out of money and go on Medicaid? Medicaid will consider your windfall a gift and will require you to pay market price towards their care.

H1235 · April 26

I agree with QBC. Not only should you pay fair market value, I think I would print out a blue book value for it and include that in your records as proof that you paid a fair price.

ARIL · April 26

Agree with others that this would not be ethical, nor would it comply with your legal responsibilities as POA. In the US, state laws govern POA duties; in the state where I was made POA (Kentucky), state statutes required me to “act loyally for the principal’s benefit.” There are extensive sections on specific actions, including making gifts. You will find it helpful to read the laws in your own state (if you’re in the US). They should be readily available on the web.

I take the law to mean that as POA, I must get the best price for an item that I sell on my parent’s behalf.

Check around: look at blue book values, see what local dealers would pay you, check a national chain like CarMax. Keep records of all these prices. If you want to buy the car from your dad at the highest price someone else would pay, that is ethical, legal, and defensible. Your POA duties must take precedence over your own need for a car. You can feel good about getting your dad a good price for his car (whether or not you are the buyer) and adding those funds to his bank account to be used for his care.

H1235 · April 26

I just remembered this from a post not long ago. I can’t remember who shared it. It might be helpful.

https://www.consumerfinance.gov/consumer-tools/managing-someone-elses-money/

harshedbuzz · April 26

As POA you have a fiduciary duty to manage their money prudently.

What you are proposing to do is not ethical at all. In fact, gifting yourself the value over what you actually paid them could make them ineligible for Medicaid should they outlive their assets in the 5-year-lookback.

When I bought my aunt's car, we used a Kelly Blue Book value to establish a market price.

HB

sandwichone123 · April 26

As POA you are acting on your loved one's behalf. Would they have sold you the care for a nominal amount themselves? If they have done so in the past you have a strong case that they would choose to do so this time. Still if there is any chance of Medicaid in the future you should carefully assure that you would be able to pay back the entire difference in the car's value vs what you paid in the case of the five year lookback.

MichaelG · April 26

Thank you all!

Ethics of car buying

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