An agent is someone who is designated to manage the affairs of someone else. In a power of attorney, their authority usually extends to the management of finances or health care decisions. The person who creates the power of attorney and designates the agent is known as the “principal.”
Once an agent accepts the authority given to him or her under the power of attorney, a legally binding relationship is created between the agent and the principal. With that relationship and authority comes certain legal duties that must be adhered to. The role of an agent is entirely voluntary, but once an agent agrees to take on that role, the agent has agreed to the responsibilities that come with it.
What is an agent’s responsibility to the principal?
Being an agent under the authority of a power of attorney is a serious function and cannot be taken lightly. An agent is expected to act in good faith and with competence, care and diligence. An agent must avoid any conflicts that would prevent him or her from acting in the principal’s best interests.
An agent’s actions are governed by the authority granted in the power of attorney document, and based on the preferences of the principal. It is improper to override the desires of the principal in favor of the agent’s own preferences.
An agent is required to keep his or her own money and property separate and distinct from the property of the principal. Whenever an agent conducts financial transactions on behalf of the principal, the agent must use only the principal’s funds for the principal’s benefit. The agent is also expected to keep good records of all transactions, including receipts. An agent is required by law to provide an accounting to the principal whenever requested.
Differences between a general and limited power of attorney
Depending on the type of power of attorney, an agent’s authority may be limited. A general power of attorney provides very broad authority. For example, an agent may be given general authority to handle all financial matters or all health care decisions. A general power of attorney is commonly used to give an agent full authority to handle important decisions regarding the finances, real property, personal property and accounts of the principal. It can be valid immediately upon the execution of the document or the principal may specify that it is valid only in the event that the principal becomes incapacitated.
Whereas, a limited power of attorney normally provides more precise instructions for the agent or contains limitations on the scope of authority. If it is limited to a single transaction such as the sale of a piece of real property, once those duties have been completed or the goals accomplished, the powers are automatically revoked. A limited power of attorney may be put in place for a particular bank account and no other asset, so as long as the account is in place and the power of attorney has not been revoked, the agent may have access to that account.
Can an agent resign or be replaced?
Sometimes the power of attorney will describe how the agent can resign. If not, the agent may resign by simply giving notice to the principal. If the principal is incapacitated, the agent must give notice to the guardian or conservator (if one has been appointed). If there is a co-agent or successor agent, then notice would be given to that person, as well. A principal may remove an agent by giving notice to the agent in the same manner.
In the event none of those situations apply, an agent can resign by giving notice to the principal’s caregiver, to another person with sufficient interest in the welfare of the principal, or to a governmental agency with the authority to protect the principal. It is necessary for the principal, when an agent has resigned or has been removed, to notify any person or institution that has dealt with the agent. If a power of attorney has been recorded, it is necessary to record the revocation of the power, as well.
Powers of attorney can be highly technical documents and should be prepared by a qualified law firm to be certain of its legality. Many times a limited power of attorney is available from the institution requiring it such as as banks or title companies.