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What You Need To Know Before Agreeing To Be A Power Of Attorney

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A power of attorney (POA) is essential to every estate plan. Under the POA an agent (or more than one agent) is appointed to act on the principal’s behalf when he or she isn’t able to. The agent can pay bills, manage assets, and perform other essential tasks for the principal.

At some point, many of us have been asked by a friend or relative if we’d serve as the agent under their POA. Most people ask an adult child or a trusted friend to agree to serve as their agents, if needed.

While it’s a compliment to be asked to serve as someone’s agent under a POA, it also comes with some responsibilities that not many people are aware of. You should be aware of the key responsibilities might come with the authority.

The Uniform Power of Attorney Act has been adopted in more than 25 states, with more likely to adopt it in coming years. The act imposes recordkeeping requirements on an agent, and many states that haven’t adopted the act impose similar or even more stringent recordkeeping requirements.

The agent empowered under a POA is required to keep records of all transactions made under the POA. In addition, if a family member or other interested party requests to see the records or wants an accounting of how money was handled, the agent is required to comply. In other words, the agent under a POA is accountable to the potential heirs as well as to the principal. They can demand to review the documents at any time.

If the agent fails to provide satisfactory records promptly, family members and other interested parties can ask a court to order production of the records. Some states have an agency that is empowered to oversee agents acting under POAs, allowing the agencies to conduct investigations and take other actions.

Some state laws are more onerous. California hasn’t adopted the 2006 uniform law yet, but it’s POA law says it is a breach of the agent’s fiduciary duty to fail to keep adequate records of transactions. Once it is alleged that the records are inadequate, the agent has the burden of rebutting it in court.

In all states, once a court or agency finds that the agent isn’t acting properly, usually it’s not another family member or friend who’s appointed take over as agent. Instead, the state is considered the agent for the principal, and a professional guardian or fiduciary is appointed by the court or the state agency to take over the role of agent. The professional then makes the decisions on the principal’s behalf and charges fees for acting as the agent. Once a professional fiduciary is appointed, it’s difficult for family members or friends to regain control of the principal’s affairs.

Before agreeing to be someone’s agent, be sure you understand the responsibilities that could come with the role. And when preparing your own POA, be sure the people you are considering to be your agent will be able to fulfill all the responsibilities so your affairs don’t end up being managed by a professional fiduciary.

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