If you have been appointed as an agent, or “attorney-in-fact,” under a durable power of attorney, general power of attorney or financial power of attorney, you may have questions about your duties, responsibilities and powers as agent. Your appointment allows you to act in place of the “principal” – the person signing the power of attorney — for financial purposes.
When does the power of attorney take effect?
Unless the power of attorney is “springing,” it takes effect as soon as it is signed by the principal. A “springing” power of attorney takes effect only when the event described in the instrument itself takes place. Typically, this is the incapacity of the principal as certified by one or more physicians.
In most cases, even when the power of attorney is immediately effective, the principal does not intend for it to be used until he or she becomes incapacitated. You should discuss this with the principal so that you know and can carry out his or her wishes.
As long as the principal has the mental capacity, he or she may continue to conduct his or her financial matters.
What are my duties as agent?
You have been appointed to represent the principal with respect to his or her financial affairs. In effect, you can step into his or her shoes and take whatever investment and spending measures the principal would take himself or herself. Unless limitations have been placed in the power of attorney itself, you can open bank accounts, withdraw funds from bank accounts, trade stock, pay bills, cash checks. All steps you take must be consistent with your role as a “fiduciary.”
What does it mean to be a “fiduciary”?
A fiduciary is someone who has a duty to another party. As a fiduciary you will be held to the highest standards of good faith, fair dealing and undivided loyalty with respect to the principal. You must always act in his or her best interest and keep his or her goals and wishes in mind in making any discretionary decision.
Can I be held liable for my actions as agent?
Yes, but only if you act with willful misconduct or gross negligence. If you do your best and keep the principal’s interests in mind as the basis for your actions, you will not incur any liability.
Any legal document you sign on behalf of the principal, such always be signed as agent. For example “John Principal by Jane Agent Agent under a power of attorney. By signing as agent you will avoid personal liability for your actions as agent. For example, if you are signing an assisted living facility admission agreement and you sign as power of attorney, the facility may not hold you personally responsible for the payment of fees; provided that you are acting properly as agent.
What if there is more than one agent?
Depending on the wording of the power of attorney, you may or may not have to act together on all transactions. In most cases, when there are multiple agents they are appointed “severally,” meaning that they can each act independently of one another. Nevertheless, it is important for them to communicate with one another to make certain that their actions are consistent.
Can I be fired?
Certainly. The principal may revoke the power of attorney at any time. All he or she needs to do is send you a letter to this effect. The appointment of a guardian does not immediately revoke the power of attorney. But the guardian, like the principal, has the power to revoke the power of attorney.
What kind of records should I keep?
It is very important that you keep good records of your actions under the power of attorney. That is the best way to be able to answer any questions anyone may raise. The most important rule to keep in mind is not to commingle the funds you are managing with your own money. Keep the accounts separate.
You should keep some sort of accounting showing all money coming in and all money going out and any back up documentation. You should anticipate that you may be required to show these records at any time. It is much easier to remember and document transactions that just occurred than to create an accounting months or years later.
Can I be compensated for my work as agent?
If the power of attorney provides for compensation, you may be compensated. If you would like to be paid, it is best that you discuss this with the principal, agree on a reasonable rate of payment, and put that agreement in writing. That is the only way to avoid misunderstandings in the future. Any compensation you receive will be considered income to you and must be reported on your income tax return.
