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We have medical POA for her care and her daughter who lives in Arizona has financial POA (prior to our home she lived with her for many, many years).  We are fortunate that we are financially stable. Her daughter (lives in Arizona) has kept half of her SS check for the past 5 years. I know my MIL, who now has dementia, has no clue or maybe she does.  Is this legal because she has Financial POA?

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Well. At some point your husband is going to have to ask her what she's doing with the money. Because the question of whether what she is doing is legal or not depends entirely on what exactly she is doing.

If she is spending it on anything unconnected with your MIL's welfare, that's an abuse of her POA. Theft, I suppose, when you boil it down; though it would probably be actioned under slightly less damning names were it ever to be followed up.

This isn't really your problem; but it is your husband's problem. For example, have you thoroughly read through the stipulations of his medical POA? Because if he has through that any kind of safeguarding responsibility, and he is wilfully ignoring a misappropriation of his mother's funds... Somebody is bound to ask why he sat there and did nothing, not so much ask what was going on, aren't they?

I think perhaps you had better take some legal advice on what to do. If it were me, I would be looking for help with formulating a courteous, measured request to SIL to account for her mother's money. But you want to be careful not to make any accusations - for all you know, she's banking it conscientiously in a dedicated savings account.

Perhaps one way would be to provide SIL with a statement of MIL's budget over the time she's been living with you, a detailed account of her income and expenses; and ask her to reciprocate.

If nobody ever does anything about this and your MIL never requires the kind of medical care that could bankrupt a small city, I doubt if any authorities will take any interest in it. What, if anything, would you like to do about it in an ideal scenario?
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PS we document every penny we have been saving for funeral and other little expenses she incurs (like depends, lottery and little gifts she gives her grandkids). She has spending money to buy little things here and there. She is 97 and has dementia. Like I said, we don't need her money and she doesn't need it either, I just wanted to know if it's legal or not.
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My MIL has no bills, she lives with us. All her medical bills are paid (which there really is non) she pays from her the half her Daughter sends. We have been saving some of the money for her funeral. Her daughter has not made any comments regarding saving anything for her and my husband won't ask her. It is not an issue, I was just asking if this is legal or not? Believe me she has no legitimate purpose for using her money.
PS My husband and sister don't get along.
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If this has been going on for five years to your certain knowledge, then...

why has it become an issue only now?
have you not been able to ask your sister in law what's going on, for some reason?

I would like to think that FF is spot on, and SIL is simply using the retained funds for legitimate purposes. But there shouldn't be any harm in asking, is there?
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Tessa, if your husband's sister is the Financial Power of Attorney, that tells me she is paying bills for her Mom, thus she needs funds in Mom's account to do so.  Or she is putting that amount into a money market for Mom.

Are any bills coming to your home? If not, then the bills are going to MIL's daughter's house for payment. Bills such as credit cards if MIL still uses them, or for past bills that the daughter is still trying to pay off if her Mom was only paying the minimum.
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