Q. My lifelong friend, Declan, has a family that has a history of early-onset Alzheimer’s. Declan is worried that he will get sick when he is still young and will not be able to pay his bills or make other decisions about his savings, his house, or his wishes when it comes to healthcare. Declan has an appointment at your office to sign a Financial Power of Attorney and Advance Medical Directive as part of his estate planning and incapacity planning. He called me the other day and asked if he could name me as his agent and give me the power to make decisions about business, financial, and legal matters for him. Before I accept, can you provide information on what my duties would be as his agent? Thanks for your help!
A. If you choose to assume the role, the law gives you a lot of responsibility as an agent under a General Power of Attorney.
Many people don’t understand that a General Power of Attorney is one of the most powerful legal documents that a person should have. It usually gives another person (or persons) the ability to act on your behalf with regard to all financial and legal matters. They are typically able to engage in such actions, without your direct oversight, because the document allows for that.
In appointing someone to make all of his business, financial, and legal decisions for him, Declan likely has no doubt in your ability to perform honorably in any areas for which he gives you authority. If you choose to accept the responsibility, you will be what’s known as a fiduciary. The role of a fiduciary carries with it legal responsibilities.
As a fiduciary, you must be trustworthy, honest, and act in good faith. If you do not meet these standards, you could be removed as a fiduciary, sued, arrested, or have to repay money.
Four basic duties of a fiduciary include the following:
1. Act only in Declan’s best interest:
Because you would be dealing with Declan’s money and property, your duty is to make decisions that are best for him. This means you must ignore your own interests and needs, or the interests and needs of other people.
To help act in Declan’s best interest, follow these guidelines:
- Read the Power of Attorney and do what it says. Your authority is strictly limited to what the document and state law allow.
- Follow Declan’s directions in the document, even if you have the best intentions in doing something different.
- Understand when the Power of Attorney becomes effective. It usually becomes effective right away, but is intended to be used only in the future when Declan can no longer make his own decisions.
- As much as possible, involve Declan in decisions. If he can’t say what he wants, try to find out what he would have wanted, unless doing so would harm him.
- Put his well-being above saving money for others who may inherit his money and property. Make sure he is safe and comfortable, and his needs are met.
- Avoid conflicts of interest. A conflict of interest happens if you make a decision about Declan’s property that may benefit someone else at Declan’s expense.
- Don’t borrow, loan, or give Declan’s money to yourself or others unless specifically allowed. Any gifts or loans must be specifically allowed by the document and should be in line with what Declan would have wanted. For example, if Declan gave money every year to a charity, the Power of Attorney may allow you to continue doing that.
2. Manage Declan’s money and property carefully:
As Declan’s agent, you might pay bills, oversee bank accounts, and pay for things he needs. You might also make investments, pay taxes, collect rent or unpaid debts, get insurance if needed, and do other things specified in the Power of Attorney.
You have a duty to manage Declan’s money and property very carefully. Use good judgment and common sense. As a fiduciary, you must be even more careful with Declan’s money than you might be with your own!
- Make a list: A good place to start is by listing Declan’s money, property, and debts. To make careful decisions, you need to know what Declan owns and owes. Your list might include checking and savings accounts; cash; pension, retirement, annuity, rental, public benefit, or other income; unpaid credit card bills, and other outstanding loans and more.
- Protect his property: Keep his money and property safe. You may need to put valuable items in safe deposit boxes, change locks on real estate, and make sure his home and other property is adequately insured. Make sure bank accounts earn interest if possible and have low or no fees. Review bank and other financial statements promptly. If Declan owns any real estate, keep it in good condition.
- Invest carefully: If you are making investment decisions for Declan, talk to a financial professional.
- Pay bills and taxes on time.
- Cancel any insurance policies that Declan does not need.
- Find out if anyone owes Declan money, and try to collect it.
3. Keep Declan’s money and property separate:
Never mix Declan’s money or property with your own or someone else’s. Mixing money or property makes it unclear who owns what. Confused records can get you in trouble with Declan’s family and also with government agencies, such as adult protective services and the police.
- Keep things separate: Never deposit Declan’s money or property into your own or someone else’s bank account or investment account.
- Avoid joint accounts: If Declan already has money or property in a joint account with you or someone else, get legal advice before making any change.
- Keep title to Declan’s money and property in his own name. This is so other people can see right away that the money and property is Declan’s and not yours.
- Pay Declan’s expenses from his funds, not yours. Spending your money and then paying yourself back makes it hard to keep good records.
4. Keep good records:
You must keep accurate and complete records of Declan’s money and property.
Practice good recordkeeping habits:
- Keep a detailed list of everything that you receive or spend for Declan. Records should include the amount of checks written or deposited, dates, reasons, names of people or companies involved, and other important information.
- Keep receipts and notes, even for small expenses.
- Avoid paying in cash. Try not to pay Declan’s expenses with cash.
- Try not to use his ATM card to withdraw cash or write checks to “Cash.” If you need to use cash, be sure to keep receipts or notes.
Getting paid? The Power of Attorney or state law may say whether you can be paid for acting as agent. If you will be paid, be sure you charge a reasonable fee. Please see this week’s Critter Corner for Ernie and Janette’s advice about reasonable compensation. Remember, it is up to you to keep detailed records as you go along of what work you did, how much time it took, when you did it, and why you did it.
When Does Your Job as Agent under Power of Attorney End?
A Power of Attorney loses all authority at the moment of death. Anyone that serves as an agent under a Power of Attorney should cease all action under that document at the moment of death.
Hope this is helpful in making an educated decision about whether or not to serve as your friend’s agent under his Power of Attorney!
Every Adult Needs a Power of Attorney
Whether or not you believe you will be sick or unable to make important decisions someday, you never know what can happen or when it will happen. That’s why every adult should have both financial and medical powers of attorney in place, and a separate powers of attorney for real estate, one for each piece of real estate owned. Signing these documents is called incapacity planning, and is also an integral part of comprehensive estate planning (estate planning goes further by disposing of your assets upon death, usually by means of a living trust to avoid the hassles and expenses of probate). Powers of Attorney offer the peace of mind that someone you appoint can step in if and when needed to handle your legal and financial affairs, and healthcare decisions. If you have not done incapacity planning or estate planning yourself, or if you have a loved one who is nearing the need for long-term care or already receiving long-term care, the time to plan is now. Please contact us at any time to make an appointment for an initial consultation:
Power of Attorney Lawyer Fairfax: 703-691-1888
Power of Attorney Lawyer Fredericksburg: 540-479-1435
Power of Attorney Lawyer Rockville: 301-519-8041
Power of Attorney Lawyer DC: 202-587-2797
About Renee Eder
