Has a Relative Named You As Power of Attorney in Virginia? Important Information You Need to Know Before Agreeing to Serve as Agent.
Many people use powers of attorney as part of their estate plan. Used in this way, a power of attorney will permit others to engage in financial transactions (such as paying bills, etc.) on your behalf in the event you become incapacitated or unable to care for yourself. As such, a power of attorney can be a cost effective way of avoiding complicated and expensive court proceedings to obtain guardianship or conservatorship. Typically clients will name a family member or friend as their “agent” for these purposes under a power of attorney. However, Virginia imposes several specific obligations on any person acting as an agent under a power of attorney. Problems can arise when an agent is unaware of these requirements, and fails to follow them.
Responsibilities as a Fiduciary
As noted previously, a power of attorney allows the agent to engage in financial transactions on behalf of the person that executed it (the “principal”). The terms of the power can limit this power to only specific transactions, or it can grant the agent the ability to undertake any transaction that the principal would normally be able to do. When exercising the authority granted by a power of attorney, the agent has a fidiciary duty to the principal. This means, essentially, that all actions taken by the agent must be for the benefit of the principal. In other words,the agent cannot engage in transactions that would be to his or her personal benefit, rather the transaction must be for the benefit of the principal. The duties of an agent are more specifically set forth in Virginia’s enactment of the Uniform Power of Attorney Act, specifically Virginia Code Section 64.2-1612. Among other things, this code section requires that keep “records of all receipts, disbursements and transactions” undertaken by the agent.
Liability for Breach of Obligations to Principal
An agent can be liable to the principal if he or she engages in transactions and fails to abide by these duties. Virginia Code Section 64.2-1615 states that this liability can include the requirement that the agent “Restore the value of the principal’s property to what it would have been had the violation not occurred… .” In addition, the agent may be required to reimburse any attorney’s fees that the principal incurred as a result of the violation.
As you can see, taking on the role of an agent under a friend or family member’s power of attorney is no small thing. As the saying goes – with great power comes great responsibility. Therefore it is important for everyone involved to act with an appreciation of what is required when nominating an agent. For the person creating the power of attorney this means making sure to name an agent who will be up to the task of carrying out the responsibilities required of an agent. For the potential agent this means understanding what will be expected of you when acting as agent under a power of attorney and the potential liabilities that can result.