ESTATE PLANNING: WHAT ARE THE DUTIES AND RESPONSIBILITIES OF AN AGENT UNDER A POWER OF ATTORNEY?

What Are My Duties As An Agent?

As an Agent or "attorney-in-fact" under a durable Power of Attorney, you have been appointed to represent the "Principal" with respect to his or her financial affairs. In effect, you step into the Principal's shoes to manage his or her finances. 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, and cash checks. All steps you take, however, must be consistent with your role as "fiduciary."
 

What Does It Mean To Be A "Fiduciary"?
 

A fiduciary is held to the highest standards of good faith, fair dealing, and undivided loyalty to the Principal. You must always act in his or her best interest and keep the goals and wishes of the Principal in mind in making any discretionary decision. However, you do not have the same responsibility as a trustee or executor who has total control over the estate or trust assets. As an Agent under a Power of Attorney, you share control with the Principal.

Can I Be Held Liable For My Actions As An Agent?
 

You are liable if you act with willful misconduct or gross negligence. If you do your best and keep the Principal's best interest in mind, you will not incur any liability.
 

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 upon the occurrence of an event described in the document. Typically, a "springing" Power of Attorney takes effect when the incapacity of the Principal has been certified by one or more physicians. In most cases, even when the Power of the Attorney is effective immediately, 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 his or her intentions.

What If There Is More Than One Agent?

A Principal may appoint more than one Agent in a Power of Attorney or he or she may sign more than one Power of Attorney. Depending on the wording of the document, multiple Agents may or may not have to act together on all transactions. In many cases, when there are multiple Agents, they are appointed "severally" meaning that they can act independently of one another. Nevertheless, it is important for them to communicate with one another to be sure that their actions are consistent and in the best interests of the Principal.

Can An Agent Be Fired?
 

The Principal may revoke the Power of Attorney at any time. The Principal simply needs to send you a letter to that effect. The appointment of a conservator or a guardian by the Probate Court does not immediately revoke a Power of Attorney, but, like the Principal, a conservator or guardian has the power to revoke a Power of Attorney.
 

What Records Should I Keep?

It is very important that you keep good and complete records of your actions as an Agent under a Power of Attorney. This is the best way to answer any questions that may be raised in the future about your actions. If you are managing the Principal's money, the most important rule to keep in mind is not to co-mingle the Principal's funds with your own money. Keep any accounts separate. The best way to do this may be to run all of the Principal's funds through a checking account. The checks will serve as receipts, and the checkbook register will serve as a running account.

May I Be Compensated For My Work As An Agent?
 

If the Principal has agreed to pay you, you may receive compensation. In general, an Agent is entitled to "reasonable" compensation for services. In many cases, however, the Agent is a family member and does not expect to be paid. If you and the Principal decide that payment is in order, discuss a reasonable rate of payment and put that agreement in writing. This is the only way to avoid misunderstandings in the future.
 

May I Make Gifts To Myself Or Others?

Generally, your authority as an Agent is to manage the Principal's assets for his or her sole benefit. However, the Principal may have given you written authority to make gifts of the Principal's assets for the purposes of estate planning or Medicaid planning. Generally, if the Principal has the capacity to do so, he or she should decide whether to make the gifts and should make them himself or herself. If the Principal no longer has the capacity to make such decisions, gifts should be made only if they are in the best interests of the Principal. You should consult and follow the language in the Power of Attorney in determining whether to make any gifts of the Principal's assets. You should also seek legal advice because making gifts could be an abuse of your authority and could place the Principal at risk.