Your Duties as an Agent Under a Financial Power of Attorney

If you have been appointed as an agent, or attorney-in-fact (“Agent”) with respect to a Principal’s financial affairs you are a trusted fiduciary that is held to a very high standard of legal conduct. As an Agent you stand in the shoes of the Principal at a time when the Principal may be incapacitated and not able to manage their finances.

When does the power of attorney take effect?

The legal document itself may be called a General Durable Power of Attorney or Financial Power of Attorney. For our purposes, a “Power of Attorney” may be effective immediately or may be “springing” which means that your authority as an Agent is conditioned on a triggering event. A typical event is obtaining a letter from a doctor that confirms that the Principal is not able to manage his or her financial matters. Other documents are effective immediately because by the documents terms it indicates that it is effective immediately. There is a presumption if there is no indication as to whether it is springing or immediate, it is presumed to be immediate authority.

Interestingly, when we have a client execute his or her estate planning documents the Power of Attorney may appear on its face that there is an expectation that the duties are to be assumed effective immediately. But if the Principal is in great health without any need for support then there is no intention for you as the Agent to begin to assume management of financial matters until support is needed. In fact, the Principal may choose not to provide you with a copy or an original of the document. Rather, you may be told where the document is stored.  You should discuss this with the Principal so that you and can carry out his or her wishes as to the timing of your assistance.

Additionally, when you assume responsibilities in Pennsylvania, there is an Agent’s Acknowledgment that must be signed, and our firm requires the form to be notarized. The original is then attached to the original General Durable Power of Attorney and all subsequent copies of the Power of Attorney are to include a copy of this form as well. Keep in mind that all steps you take must be consistent with your role as a “fiduciary” and should maintain the Principal’s estate plan.

What does it mean to be a “fiduciary?”

This means that 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 the Principal’s best interest and keep the Principal’s goals and wishes in mind in making any discretionary decision.  However, you do not have the same responsibility as a trustee or personal representative of an estate, who has total control over the estate or trust assets. This is because as an agent you share control with the Principal himself or herself.

Can I be held liable for my actions as attorney in fact?

Yes, but only if you act with willful misconduct or gross negligence.  If you do your best and keep the Principal’s best interests in mind as the basis of your actions, you should not incur any liability.

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 so that they may act independently of each other. Occasionally, a document may require the Agents to act collectively. Nevertheless, it is important for the Agents to communicate with one another to make certain their actions are consistent.

Can you be fired?

Certainly. The Principal may revoke the document and your appointment as an Agent at any time.  All the Principal needs to do is send you a letter to this effect. The appointment of a guardian does not immediately revoke a power of attorney. However, the court, like the Principal, has the power to revoke the power of attorney.  An Agent’s authority also ceases upon the death of the Principal. At that time, the personal representative of the estate (once appointed) becomes the official representative.

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. In some cases, a formal or informal accounting is required and records that would be needed include a list of assets that you started with as an Agent, lists of all receipts of income, records of all sales or transactions, lists of all distributions for payments or transactions of any kinds. Copies of tax returns that you have also handled should be maintained as well.

When is the scope of my authority?

You must review the document to confirm the scope of your authority as it is contained in the document so that you become familiar with any precondition (such as a doctor’s note) that may be required before you can serve. 

Once you assume responsibilities as an Agent, you are likely tasked with managing lower level administrative financial matters (such as bill paying, monitoring insurance coverage, tax returns, etc.). The document may also grant you authority and therefore the responsibility to assume responsibility for managing investments, businesses, and real estate, etc.  At a similarly high level of responsibility is asset protection, long-term care planning and income tax planning.  There are very high-level planning objectives that, if the Principal were competent and to participate, he or she very well may wish to make significant adjustments to their financial affairs.  You should review the scope of authority of the document, step into the shoes of the Principal and take interest in the best interest of the Principal.

There is a very important question as to whether an Agent may adjust the Principal’s estate plan. In Pennsylvania, the law changed considerably with the requirement as to “Hot Powers” that relate to your authority to make changes to the Principal’s estate plan. These types of

authority must also be carefully reviewed and discussed by you with legal counsel before you take any important actions that would make changes to asset titles, beneficiary designations, creation of irrevocable trusts, revocable trusts, etc.  However, just know that General Durable Powers of Attorney that have been drafted by Anderson Elder Law are built to have important and power protective provisions for the benefit of the Principal and his or her goals. Can I be compensated for my work as agent?

Yes, if the Principal has agreed to pay you in the terms of the document. In general, the Agent is entitled to "reasonable" compensation for his or her services. However, in most cases, the Agent is a family member and does not expect to be paid. 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.

Why do Third Parties Reject My Authority as an Agent Under Power of Attorney?

Do NOT be surprised by a third party rejecting a perfectly legal document that appoints you as an agent under a General Durable Power of Attorney. Interesting enough, many banks prefer to add a person as a joint owner rather than accept the person’s appointment as an agent under Power of Attorney.

A few things about the General Durable Power of Attorney if prepared by Anderson Elder Law. The document, by its terms, indicates a copy is deemed to be an original. What this means is that no one other than a real estate title company in the context of a real estate transaction should insist on retaining the original document.  If you present a Power of Attorney to a third party such as Vanguard, Wells Fargo, etc. and are told that the document will not be accepted, please obtain the contact information of the person who is in charge at that branch or office and contact our office. We will provide a Certified Copy to that institution at no charge to you with a letter requesting that it be reviewed by their legal counsel. 

As an alternative, you may contact our office for further assistance.  We can prepare an Affidavit by Agent Under Power of Attorney that you may execute in the presence of the third party that indicates that to the best of your knowledge (if true) that the document remains in effect and other requirements as per the Pennsylvania law.  In some cases, the affidavit can be another way to expedite the acceptance of a General Durable Power of Attorney.