If you have been named in a Power of Attorney (“POA”) as the agent (also known as attorney-in-fact) to act on behalf of another, you must be careful to act within the letter and spirit of the law when you exercise that authority. Here are some things to watch out for.
- First, did the POA take effect yet, and if so, is it still in effect? In New Jersey, a POA may be effective when signed, or only in the event of disability; it may be durable, or it may lapse over time. There are other factors that may come into play as well; perhaps the principal (the person for whom the power is exercised) was under a disability at one time, but has since improved. In such a situation, the POA may be revoked. Furthermore, a POA ceases to be valid upon the death of the Principal.
- Second, does the POA give you the specific authority that you are seeking to exercise as agent? This can be complicated. A POA may be limited to one purpose, such as authorizing you to sell the principal’s house; if that is the case, then you are not permitted to use the POA for any other purpose at all. A POA may include express and implied powers, or a catch-all phrase referring to all powers necessary to carry out its purpose. Most banking transactions are not authorized unless the POA contains certain specific language to that effect. Similarly, an agent may not make a gift on behalf of the principal without an express grant of gifting authority within the POA.
- Third, are you acting for the sole benefit of the principal? As the agent, you owe a fiduciary duty to the principal to act for the principal’s sole benefit. Breach of that fiduciary duty is punishable by law.
- Fourth, are you keeping accurate records? This is another duty that the agent owes to the principal. As the agent, you may be legally required to render an accounting.
- Fifth, do you need to retain a financial planner, an accountant, or an attorney to properly discharge your responsibilities as agent? This is particularly important to assess if the principal has given you the authority to manage investments or other financial matters.
These are just some of the things to keep in mind when using a POA, not an exhaustive list. As always, there are “ifs, ands, and buts” too complicated to summarize in this blog post. Call us with any questions about your particular circumstances.