02 Nov AGENCY UNDER A POWER OF ATTORNEY: SERVICE BY SOME BUT AGENT ORANGE TO OTHERS
Financial powers of attorney are commonly used to give authority to a trusted individual (the “Agent”) to handle assets of the one who signed (the “Principal”) the power of attorney. The power of attorney is an important estate planning document especially if the Principal should become disabled so that costly guardianship could be avoided. Powers of attorney terminate on death. However, an Agent is tantamount to an armed guard whose responsibility is to protect the assets of the Principal. The Agent is a fiduciary to do what is in the best interest of the Principal and to act in good faith on the Principal’s behalf. Failure to do so could be a criminal act or liability for damages incurred by the Principal. The Agent has a duty to preserve the Principal’s estate.
Under Texas law, an Agent should keep records of their actions including the retention of receipts and disbursements. The Principal could request an accounting (unless the power of attorney dictates otherwise).
If the Agent misappropriates funds, the District Attorney could pursue criminal charges (the level of crime would increase with the amount misapplied). A civil suit against the Agent could also be pursued by the Principal, the Principal’s guardian or other fiduciary such as a trustee of a trust created by the Principal for the benefit of the Principal, a governmental agency which is to protect the Principal like Adult Protective Services, a beneficiary who is supposed to receive assets of the Principal upon Principal’s death, or any person who proves to the court that they have sufficient interest in the Principal’s welfare (which is when the Principal is alive) or estate (during the Principal’s life and after the Principal’s death).
Family members are often chosen as an Agent. However, that Agent should be aware that with responsibility there is liability especially if there are family disputes. To some, an Agent is a service to help out a friend or loved one, especially during disability. To others, it can be as toxic as Agent Orange due to the liability that could be incurred.