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8 Common Questions (and Answers) About Being an Agent Under a Power of Attorney

You have just been appointed as an agent (or “attorney-in-fact”) under a statutory durable power of attorney – a document that, for most people, is even more useful than a will. Your appointment allows you to act in place of the “principal,” or person executing the power of attorney, for financial purposes when and if that person ever becomes incapacitated. Here are the answers to eight frequently asked questions about the agent’s duties, responsibilities, and powers given under the document.

 

1. 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 their shoes and take the investment and spending measures the principal would take themselves. Unless limitations have been placed or outlined 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 must be consistent with your role as a “fiduciary.”

 

2. What does it mean to be a “fiduciary?”

To be a “fiduciary” 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 their best interest and keep their goals and wishes in mind when 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, since you share control with the principal. Your duty only covers the level of care you take in your own actions as agent.

 

3. 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 of your actions, you will not incur any liability.

 

4. When does the power of attorney go into 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 document takes place. For example, a power of attorney that only grants power to the agent when the principal is deemed incapable of making their own decisions. In most cases, even when the power of attorney is immediately effective, the principal does not intend for it to be used until they become incapacitated. As an agent, you should discuss this intention with the principal so you can effectively carry out their wishes.

 

5. What if there is more than one agent?

Depending on the wording in the power of attorney, co-agents will likely have to act together on all transactions. At Hegwood Law Group, we recommend appointing one primary agent and a few alternative agents in the order you would like for them to serve, so only one agent will act at a time. This way, you will also have back-up agents should the primary agent become incapacitated or unable to serve. We do not recommend appointing co-agents, as many decisions that need to be made together typically need to be made in-person, and not all co-agents may live near each other or the principal. In addition, disagreements may arise and it may take longer for the co-agents to agree on decisions. Nevertheless, it is important for any agents to communicate with each other to ensure their actions are consistent.

 

6. Can I be fired?

Yes, agents can be fired. The principal may revoke the power of attorney at any time. All they need to do is send you a letter stating this decision. In the case of a guardianship over the principal, the power of attorney will usually be immediately revoked.

 

7. What kind of records should I keep?

It is very important that you keep good records of your actions under the power of attorney; this is the best way to be able to answer any questions that may be raised. The most important rule is to not co-mingle the funds you are managing with your own money. Keep the accounts separate. The easiest way to keep records is to run all funds through a checking account, and the checks will act as receipts.

 

8. Can I be compensated for my work as agent?

Yes, if the principal has agreed to pay you. In general, the agent can be entitled to “reasonable” compensation for their 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. This is the best way to avoid misunderstandings in the future.

To learn more about powers of attorney or for questions regarding the role of an agent, do not hesitate to ask an experienced member of our team by calling our office at (281) 218-0880 or contact us here.

Hegwood Law Group

Hegwood Law Group
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