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FIVE THINGS TO KNOW ABOUT BEING THE AGENT
UNDER A FINANCIAL POWER OF ATTORNEY

1. Limited Authority. An agent's powers are limited to what is spelled out in the written power of attorney document. If the document does not clearly state that the agent can do more than pay bills, then the agent's hands are tied when it comes to more complicated planning or transactions.

2. Receipts and Disbursements. An agent must keep a record of all receipts, disbursements and transactions made on behalf of the principal. A Court may order the agent to disclose these records to the principal, to the Court, to a guardian appointed for the principal and, in some cases, to other people who are heirs of the principal's estate. There is no required form of record keeping or reporting, but the agent must be prepared to explain all money spent from the principal's assets.

3. Duties to the Principal. An agent acting under a power of attorney must act:

  1. in good faith

  2. in the principal's best interests; and

  3. only within the scope of the authority granted in the power of attorney document.

The agent must also be loyal, avoid any conflicts of interest and attempt to preserve the principal's estate plan. If the agent might do anything that benefits the agent, the agent must be extremely cautious. An agent may not do anything without some authorization clearly written in the power of attorney document.

4. No Gifts and Limited Gifts. Gifts from the principal's funds are prohibited unless the power of attorney document specifically states that the agent may make gifts. If the power of attorney document authorizes gifts, the statutes limit the amount of any gifts. In some cases the agent may also be prohibited from receiving a gift themselves. An agent cannot assume that gifts are acceptable. The language of the power of attorney document is extremely important and must be carefully reviewed before an agent makes gifts from the principal's funds.

5. Reimbursement and Compensation. The statutes allow the agent to be reimbursed for expenses reasonably incurred on behalf of the principal. The statutes also allow the agent to receive compensation that is reasonable under the circumstances. However, compensation is a difficult subject where many different issues and rules affect what is "reasonable under the circumstances". Agents should exercise great care whenever they are in a position to pay themselves compensation.

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This is not legal advice or tax advice, pursuant to disclaimer.
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