Many average people are named as agents under a power of attorney for a family member or friend, and most have little to no idea what they are getting themselves into. Many people also are aware of the fact that a relative may serve as agent under a power of attorney for a family member or friend, and may be ignorant of how much financial mischief that person could commit with that authority. This blog post outlines the duties of an agent under a power of attorney. I will follow-up this blog post with another post in the coming weeks that discusses what remedies people have against an agent under a power of attorney for misconduct.
There are several sources of law that govern the conduct of an agent under a power of attorney. Virginia (like a sizable number of states) has adopted the Uniform Power of Attorney Act with some changes made from the Uniform Act. In addition to the Virginia Uniform Power of Attorney Act, common law principles also govern agents’ duties.
The Virginia Uniform Power of Attorney Act contains two categories of duties that apply to agents: the first category contains mandatory duties that the principal (the person granting authority to an agent in a power of attorney) cannot have his estate planning attorney draft around. These include the duties to act in accordance with the principal’s reasonable expectations to the extent actually known by the agent and, otherwise, in the principal’s best interest; to act in good faith; and to act only within the scope of authority granted in the power of attorney.
The second category contains default duties that the principal can have his estate planning attorney draft around (in other words, these duties will apply to the agent by default, unless the power of attorney states otherwise). These include the duties to act loyally for the principal’s benefit; to act so as not to create a conflict of interest that impairs the agent’s ability to act impartially in the principal’s best interest; to act with the care, competence, and diligence ordinarily exercised by agents in similar circumstances; to keep a record of all receipts, disbursements, and transactions made on behalf of the principal; to cooperate with a person that has authority to make health care decisions for the principal to carry out the principal’s reasonable expectations to the extent actually known by the agent and otherwise act in the principal’s best interest; and to attempt to preserve the principal’s estate plan, to the extent actually known by the agent, if preserving the plan is consistent with the principal’s best interest based on various factors.
It’s usually not a good idea for a principal to waive the default duties of an agent. In the instances where I’ve litigated cases involving powers of attorney that have waived numerous default duties, there were concerns that such was done as a result of a prospective agent improperly pressuring or unduly influencing the principal into doing so (presumably in order to make it easier for the agent to take advantage of the principal). Even if all of the default duties are waived, however, family members of a principal still have a strong legal remedy pursuant to Section 64.2-1612(A) by virtue of the fact that a principal cannot waive an agent’s duties to act in good faith and in the principal’s best interests.
The biggest mistake that I’ve seen agents make is failing to fulfill their duties to “keep a record of all receipts, disbursements, and transactions made on behalf of the principal.” Agents should ensure that they keep all receipts, bank statements, credit card statements, contracts, etc. While the Virginia Uniform Power of Attorney Act does not contain a precise time frame for how long the records should be kept, agents should keep them for at least 6 years from the date of the receipt, disbursement, or transaction (in light of Section 64.2-1612(I)’s provision relating to disclosing records pertaining to actions within 5 years of the principal’s death, plus the 1 year that the requestor has to request such).