The Center of the Bulls-Eye | The Dangers of being a fiduciary under a DPOA
Somebody has to do it.
If you drew the short straw and were appointed an agent under a DPOA, then you should at least know how to keep yourself out of trouble.
A DPOA is a Durable (financial) Power of Attorney. The person who signed the Power of Attorney is the principal. The person appointed to act is the agent.
Every state has its own law about durable powers of attorney. Texas has a revised law that went into effect on September 1, 2017, and it is very comprehensive. Regardless of the state law governing the document, there are some universal steps that everyone appointed agent should do.
First, you should read the applicable state’s statute on powers of attorney.
Second, you should read the actual power of attorney document. It spells out your authority. You don’t have any authority other than what is specified in the document. Period. If it refers back to definitions in the statute, then cross-reference the statute.
Third, start keeping a record of everything you do as an agent. This should include every person you contacted, bill you paid, and account you accessed. You have a duty to account to the principal for your actions. If the principal dies, then you have a duty to account to the executor (and ultimately the beneficiaries) of the principal’s probate estate.
Fourth, remember your limitations. You are only an agent, and cannot go against the principal’s wishes. A Power of Attorney is not the same thing as a guardianship. For example, you cannot use your power to force the principal to sell his or her house and move into a long-term care facility.
Fifth, you need to get enough information from the principal to allow you to do your job. If the principal is not immediately forthcoming, then at least insist that the principal tells you where the information is kept just in case you have to swing into action.
Sixth, bluntly stated, don’t use the DPOA to steal money from the principal. It’s not your money. It doesn’t fool anybody if you call it a gift or a loan. You also can’t steal business opportunities from the principal or self-deal. That does not mean you can never do business with the principal, but you should not engage in a transaction that you cannot defend.
That does not mean that you have to serve for free. The document should state if you are to be compensated for serving. If it is silent, then compensation is likely addressed in the statute.
You serve at the principal’s pleasure. Remember, the principal can revoke the Power of Attorney at any time. When you act as an agent, then you act as a fiduciary. That means you owe the principal the highest duty of loyalty and honesty.
With all of this in mind, you may not want to serve. That is your choice. If you decline to serve, then notify the principal in writing, and send a copy to the next-named agent.
Virginia, a 1982 SMU law school grad, has advised clients for over 35 years. For more information, visit hammerle.com, and for newsletter sign-up, email email@example.com. This column does not constitute legal advice.