Are You an Agent under a Power of Attorney? Here’s What Happens when it’s Time to Act

If you have been nominated or appointed as the agent of a Power of Attorney, you may wonder what all that entails. To put it simply, the individual who has the power of attorney (the “agent”) will make decisions on behalf of the person who wants help (the “principal”). These decisions will typically be regarding legal matters, financial matters, and in some cases, medical decisions. There are some key things to know about this process, so read on to get a basic introduction to this responsibility.

When Do Your Rights & Responsibilities Begin?

Your rights and responsibilities as an agent of a Power of Attorney either begin immediately upon the document being signed by the principal or the Power of Attorney will be “springing”. Springing means the power of attorney is a nomination, not an obligation and not effective – yet – and doesn’t become active until a specific event takes place. The triggering event is typically when the principal is declared incapacitated by one or more medical professionals. 

Pro Tip: If you have a springing power of attorney, and now need to use it, there is legal work for the agent to hire an experienced trusts and estates lawyer to:

  1. Accept the nomination of agent under the power of attorney
  2. Activate the power of attorney
  3. Some powers of attorney must be made public record to be valid
  4. Help you understand your rights and obligations as power of attorney

 Can an Agent under Power of Attorney Get Paid?

Yes. Most financial powers of attorney provide that the agent under the power of attorney may receive compensation for their services and reimbursement for their expenses. Rate of compensation is usually not fixed. How, when and how much to get paid is one of the critical discussions to have with an attorney. 

Does an Agent under Power of Attorney have to Pay the Lawyer?

No. Most financial powers of attorney provide that the agent under the power of attorney may hire lawyers, accountants and other professionals. Agents under financial Powers of Attorney may use the principal’s money to pay the lawyer.

Understanding Your Responsibilities

Once you move into the role of power of attorney, as the agent, you are obligated to manage the affairs of the principal. You can’t, however, just make whatever decisions you want when it comes to investments and other financial matters. Instead, you have what is called “fiduciary duty” to act in the best interests of your principal. To the extent possible, you should be trying to make the same decisions as they would, were they able. Some specific things that you will be responsible for include:

  • Managing Investments – Buying and selling stocks and other investments is a common activity for an agent who is in place for more than a very short period of time.
  • Paying Bills – You will be responsible for paying the bills of the principal. The payments will come out of the accounts or other assets of the principal.
  • Cashing Checks – Any checks that come in for the principal should be deposited into their accounts. 

 Pro Tip: Even in situations that are not in dispute, there is a lot of value and education that an experienced trusts and estates lawyer will provide to those acting as an agent under a power of attorney:

  1. How, when and how much should the agent get paid
  2. How to track time and expenses so the agent can be reimbursed
  3. How to handle financial assets to minimize risk and liability to the agent
  4. How to set up a trust to avoid probate and Medi-Cal recovery claims

While you are obligated to do your best when it comes to managing the affairs of the principal of the Power of Attorney, you won’t be held responsible for mistakes or other decisions that don’t go well as long as you acted reasonably under the circumstances. If it can be shown that you intentionally did something wrong that was not in the principal’s best interest, and acted with willful misconduct or gross negligence, you could be guilty of breaching your fiduciary duty to the principal.

 You Don’t Have to Act Alone

When serving as an agent in this way, you don’t have to handle everything on your own. Most people will take care of the standard day to day activities that need to be done, but will seek assistance for major decisions. For example, if you are acting as power of attorney and decide to sell assets such as a sole proprietorship business, or real estate owned by the principal, you should discuss this with an attorney before taking any concrete steps. Contact us to discuss any major decisions, or to get help with any aspect of your responsibilities as an agent.

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