You may know that a durable power of attorney is a written document by which a person designates another to transact his or her business. What you may not know, however, is that the attorney-in-fact has the full authority to perform, without prior court approval, every action authorized and specifically enumerated in the durable power of attorney. This authorization may even include the authority to sell or mortgage the principal’s real property, including his or her homestead.
Except as otherwise provided in the power of attorney, a person accepts appointment as an agent by:
– Exercising authority, or
– Performing duties as an agent, or
– By any other assertion or conduct indicating acceptance.
The scope of an agent’s acceptance is limited to those aspects of the power of attorney for which the agent’s assertions or conduct reasonably manifests acceptance. The agent does not have the same responsibility as a trustee or executor, however, who can have total control over the estate or trust assets, since the agent shares control with the principal himself or herself.
The agent’s duty only covers the level of care he or she assumes in his or her own actions as agent. An agent who violates this responsibility can be liable to the principal or the principal’s successors. This could be in interest for the amount required to restore the value of the principal’s property to what it would have been had the violation not occurred. This liability to reimburse the principal or the principal’s successors in interest may also extend to the attorney’s fees and costs paid from the principal’s funds on the agent’s behalf in defense of the agent’s actions.
It is very important that an agent always keep good records of his or her actions under the power of attorney. That is one of the best ways to be able to answer any questions anyone may raise. One of the most important rules to keep in mind is not to commingle the funds the agent is managing with his or her own money. Keep the accounts separate. One of the easiest ways to keep records is to run all funds through a checking account as the checks can act as receipts and the checkbook register as a running account.
We know this article may raise more questions than it answers. Whether you are the creator of the durable power of attorney or the agent, there is never a wrong time to seek the expertise of an estate planning attorney before taking action. Do not wait to contact our law firm to schedule a meeting.