24 May Duties and Responsibilities of a Financial Power of Attorney: Jacob K. Wooley, Partner
Naming a person as your financial power of attorney (agent) is an integral part of a comprehensive estate plan. This selection allows the agent to make important financial decisions on your behalf during times of potential incapacity. But what does it mean FOR the person named? There are certain duties and obligations assigned to your agent, and it is important that both parties understand these duties and obligations.
Duties and Responsibilities of a Financial Power of Attorney (Agent)
When accepting the authority granted under a financial power of attorney, a fiduciary relationship is established with the principal (the person represented) and the agent. This is a special legal relationship that imposes duties which continue until the agent resigns or the power of attorney is terminated, suspended, or revoked by the principal or by operation of law.
The agent generally has the responsibility to:
- act in good faith;
- do nothing beyond the authority granted in the power of attorney;
- act loyally for the principal’s benefit;
- avoid conflicts that would impair the ability to act in the principal’s best interest; and
- disclose your identity as an agent when you act for the principal by writing or printing the name of the principal and signing your own name as “agent” for that person.
In short, you are being named to stand in the shoes of the principal to act as they would act if they were able.
The Estates Code further enumerates the responsibilities of a financial agent. The Durable Power of Attorney Act (Subtitle P, Title 2, Estates Code) lays out specific instructions for agents:
- maintain records of each action taken or decision made on behalf of the principal;
- maintain all records until delivered to the principal, released by the principal, or discharged by a court; and
- if requested by the principal, provide an accounting to the principal that, unless otherwise directed by the principal or otherwise provided in the Special Instructions, must include:
- the property belonging to the principal that has come to your knowledge or into your possession;
- each action taken or decision made by you as agent;
- a complete account of receipts, disbursements, and other actions of you as agent that includes the source and nature of each receipt, disbursement, or action, with receipts of principal and income shown separately;
- a listing of all property over which you have exercised control that includes an adequate description of each asset and the asset’s current value, if known to you;
- the cash balance on hand and the name and location of the depository at which the cash balance is kept;
- each known liability;
- any other information and facts known to you as necessary for a full and definite understanding of the exact condition of the property belonging to the principal; and
- all documentation regarding the principal’s property.
Serving as a financial power of attorney (agent) is a serious responsibility. It is important to keep great records, and to make sure each transaction you make on behalf of the principal is in line with the fiduciary duty you have been granted.
Naming an agent before times of crisis is very important. By doing so it is possible to avoid long drawn-out court processes when it comes time to pay bills, access bank accounts, etc. during times of emergency. Just remember – power of attorney documents CEASE to have power when the principal passes away. Contact Crain & Wooley if you have questions or concerns regarding naming an agent or being named AS an agent.