Legal Duties of an Agent Appointed in a Power of Attorney
When a person (the principal) is considering appointing an agent in a financial power of attorney, he should select his agent carefully based on the powers being granted. As a general guideline the principal should consider someone who is honest, has sound financial judgment, will follow any financial and estate plan the principal has in place, has the principal's best interests at heart, is diligent in handling the duties and has the time available to handle all of the principal's legal and financial affairs. Below is the list of legal duties an agent must follow unless the principal specifies otherwise in the power of attorney.
There are 3 mandatory legal duties which require an agent to:
1. act in accordance with the principal’s reasonable expectations to the extent actually known by the agent and, otherwise, in the principal’s best interest;
2. act in good faith (honestly); and
3. act only within the scope of authority granted in the power of attorney.
There are 7 optional legal duties which a principal can waive. Unless waived in the power of attorney an agent must:
1. act loyally for the principal’s benefit;
2. keep the agent’s funds separate from her own unless:
a. The funds were not kept separate as of the date the power of attorney was executed; or
b. The principal commingles the funds after the date the power of attorney was executed and the agent is the principal’s spouse.
3. avoid any situation that creates a conflict of interest that impairs the agent’s ability to act impartially in the principal’s best interest;
4. act with care, competence and diligence ordinarily exercised by agents in similar circumstances;
5. keep a record of all receipts, disbursement and transactions made on behalf of the principal;
6. cooperate with a person who has authority to make health care decisions for the principal to carry out the principal’s reasonable expectations to the extent actually known by the agent and otherwise in the principal’s best interest; and
7. attempt to preserve the principal’s estate plan, to the extent actually known by the agent, if preserving the plan is consistent with the principal’s best interest based on all relevant factors including:
a. the value and nature of the principal’s property;
b. the principal’s foreseeable obligations and need for maintenance;
c. minimization of taxes, including income, inheritance, estate, generation skipping, transfer and gift taxes; and
d. eligibility for a benefit, program or assistance under a statute or regulation.
It is strongly recommended that a principal considering appointing an agent have a serious conversation with the agent about the wishes, estate plan and expectations of the principal. In addition, the principal and agent should discuss the agent's legal responsibilities and the time commitment that may be involved.
For more information about your particular circumstances and to obtain a copy of my Power of Attorney Planning Guide please contact my office to schedule an appointment.