For most people, the phrase “power of attorney” means very little. Even for those educated on the subject, it is easy to forget exactly who serves what role and why. Whether you are unfamiliar with the concept or simply need of a refresher, keep reading to learn what it means to be an agent under a financial power of attorney.
To start, it helps to understand what is being asked of an agent under a financial power of attorney. A person appointed to the role becomes a representative of the principal’s finances. In effect, they gain permission to step into the shoes of the principal and act in financial matters on their behalf.
An agent under a general power of attorney has the authority to conduct all financial business on behalf of the principal subject to any restrictions that are enumerated in the document or by state law.
In contrast, for those appointed under a limited power of attorney, the agent’s power is very specific. Typically, their ability to act on behalf of the principal is limited to specific transactions or actions outlined in the limited power of attorney – such as executing a real estate deed on behalf of an out of town principal. This kind of power of attorney offers stricter parameters for what the agent may do on behalf of the principal.
Regardless of which kind of power of attorney, agents must act as a fiduciary to the principal. This means the agent must operate in good faith, with the best interests of both the principal and the principal’s affairs in mind. When making any decisions, the agent is required to consider the choice the principal would make. Agents who abuse their power in the role can be held liable for their actions.
Sometimes, a power of attorney is executed for a specific situation, such as to complete a real estate transaction. However, for estate planning purposes a durable power of attorney is usually used. Under a durable power of attorney, the benefits and responsibilities of being an agent continue after the principal becomes incapacitated. However, many principals do not expect an agent to use this tool unless they become incapacitated. For those appointed under a springing durable power of appointment, agents will not be able to act unless the principal is incapacitated. Principals should discuss expectations with the agent to ensure there is clarity on how to best carry out the principal’s wishes.
Should an agent need to act on behalf of the principal, it is important that the agent document everything he or she does. Documentation is the best way to answer any questions or challenges to the agent’s actions. Agents should keep their own finances completely separate from the principal’s.
If you are feeling unsure about your duties as an agent under a power of attorney, be honest with the person who appointed you. Ask for clarification on your responsibilities and the expectations they have for you. You may even want to meet with an estate planning attorney for a more comprehensive discussion of your rights and options. By arming yourself with facts about your duties, you will more easily accomplish the principal’s goals and wishes.
Nielsen Law PLLC provides family focused estate planning to individuals and families in Austin, Round Rock, Cedar Park, and the Central Texas area. For more information and to learn about our firm, please contact us.