Becoming a Power of Attorney (“POA”) agent can be a very daunting job. Many questions come to mind when taking on such an important role. What are the first steps? How do you sign as an agent? What are the agent’s duties? What limits exist on the agent’s powers? What is the agent’s liability?
The First Steps: In order for a POA agent to act there must be a POA in place that is valid according to the laws of Pennsylvania. Before the agent may act, the agent must sign the acknowledgement by agent page that is part of the POA. Then the POA must be given to a third party, such as a bank, at which the agent is taking actions on behalf of the principal. Once the document is approved by the third party, the agent can act for the principal with that third party. This approval process must be followed for every third party that the agent encounters. It is important to note that anytime the agent is signing a document on behalf of the principal, the agent should put POA after signing the agent’s name.
The Agent’s Duties: Notwithstanding any provision in the POA, an agent shall: 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; act in good faith; and act only within the scope of authority granted in the POA. The abovementioned duties can never be waived. However, many other duties of an agent can be waived by providing specific language in the POA. These duties include acting loyally for the principal’s benefit and keeping the agent’s funds separate from the principal’s funds. Additional duties include acting so as not to create a conflict of interest; acting with the care, competence and diligence ordinarily exercised by agents in similar circumstances; keeping a record of all receipts, disbursements and transactions made on behalf of the principal; and cooperating with a person who has authority to make healthcare decisions for the principal. Lastly, the agent shall 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 all relevant factors, including: the value and nature of the principal’s property; the principal’s foreseeable obligations and need for maintenance; minimization of taxes, including income, estate, inheritance, generation-skipping transfer and gift taxes; and eligibility for a benefit, program or assistance under a statute or regulation.
Limits on the Agent’s Powers: Some powers must be expressly granted to the agent in the POA; otherwise, the agent will not have the authority to act in those specific situations. The powers that require specific grant of authority to act include: creating, amending, revoking or terminating a living trust; making gifts; creating or changing rights of survivorship; creating or changing a beneficiary designation; delegating authority granted under the POA; waiving the principal’s right to be a beneficiary of a joint and survivor annuity; exercising fiduciary powers that the principal has authority to delegate; and disclaiming property, including a power of appointment.
It is important to note that even if a POA expressly grants the authority to make gifts; this means that the agent has the authority to make gifts up to the Federal annual gift tax exclusion amount (currently $15,000 for 2019) per donee. If the principal wants the agent to be able to gift more than $15,000 for any sort of asset protection purposes, then the power to make unlimited gifts must be granted in the POA.
The Agent’s Liabilities: If the agent acts in good faith, then the agent will not be liable to a beneficiary of the principal’s estate plan for failure to preserve the plan. As long as the agent acts with care, competence, and diligence for the best interest of the principal, the agent will not be liable solely because the agent also benefits from the act or has an individual or conflicting interest in relation to the property or affairs of the principal. Agents who have special skills or expertise are held to a higher standard than an agent without those skills or expertise. Unless the agent breaches a duty to the principal, the agent shall not be held liable if the value of the principal’s property declines. If another person to whom the agent delegated authority fails to act appropriately or makes an error in judgment, the agent will not be held liable as long as the agent exercised care, competence, and diligence in selecting and monitoring the person. If the agent acts outside of the scope of the POA, then the agent could be held liable. In addition, if the agent signs a contract on behalf of the principal and does not put POA after the agent’s name, then the agent could become personally liable for that contract.
Taking on the role of POA agent is not something to be taken lightly. Just because an agent is named in a document does not mean that person must act. When creating the POA, the principal should always contact the agents that have been chosen to make sure they are able and willing to serve in that role. Hopefully this article will answer many questions about the POA agent.
By Jessica F. Greene, CELA,* LL.M. in Elder Law
*Certified as an Elder Law Attorney by the National Elder Law Foundation
