What Are the Duties of an Agent Under a Power of Attorney?
If you have an estate plan, it should include a durable power of attorney. A durable power of attorney provides you with protection in the event you are incapacitated during your lifetime and cannot manage your own business and financial matters; the word "durable" simply means that the document remains valid even though you are legally incapacitated. If you are incapacitated, a person you have named as your agent can seamlessly take care of your financial responsibilities and decisions. What are the duties of an agent under a power of attorney?
Ohio law provides clear instructions for agents in Ohio Revised Code section 1337.34. The statute divides duties into two categories: duties that an agent has regardless of the provisions in the power of attorney, and duties that an agent has unless the power of attorney provides otherwise.
What an Agent Under an Ohio Power of Attorney Must Do
Notwithstanding provisions in the power of attorney, an agent who has accepted appointment shall do certain things. First and foremost, the agent must act in accordance with the reasonable expectations of the principal (the person who granted the power of attorney) to the extent that these expectations are actually known. If the agent doesn’t know the principal’s specific expectations, he or she is committed to act in the principal’s best interests.
An agent must also act in good faith. This means to act reasonably and honestly, with a reasonable basis for any actions taken. Likewise, an agent must only act within his or her scope of authority. A power of attorney can be very narrow (such as to pay all of the principal’s bills out of a certain checking account) or very broad (such as to manage all assets and debts). An agent who was only granted the power to pay bills would be acting outside of his scope of authority if he sold real estate belonging to the principal.
Lastly, an agent under an Ohio power of attorney must try to preserve the principal’s estate plan to the extent actually known by the agent, if doing so is consistent with the principal’s best interest. Whether actions are consistent with the principal’s best interest is based on all relevant factors, which include the value and nature of the property; the principal’s foreseeable obligations and need for maintenance; minimization of taxes; and eligibility for public benefits.
Other Duties of an Agent
An agent must also do certain other things, unless otherwise provided in the power of attorney. These duties include acting loyally for the principal’s benefit (and it is hard to imagine a power of attorney that would encourage the agent to do otherwise).
An agent must also act so as not to create a conflict of interest that impairs his or her ability to act impartially in the principal’s best interest. For instance, investing some of the principal’s money in a business venture of the agent could create a conflict of interest. The agent might be reluctant to divest the principal’s money from the project even if that were best for the principal, because doing so might create a loss for the agent. A principal could conceivably decide to waive this obligation, especially if the agent were an adult child or other close relative.
Another duty that an agent has is to maintain good records: receipts, disbursements, and other transactions made on behalf of the principal. A power of attorney could theoretically waive this obligation, but it is difficult to imagine why an agent would choose to.
Finally, an agent under a power of attorney has the duty to cooperate with a person who has the authority to make health-care decisions on the principal’s behalf in order to carry out the principal’s reasonable expectations, to the extent that they are known. If not, once again, the default is to act in the principal’s best interests.
Ohio Agents and "Hot Powers"
As noted, agents have certain duties under a power of attorney, and they also have certain powers. However, there are some powers that they cannot exercise unless explicitly given them in the power of attorney, referred to as "hot powers."
These "hot powers include the ability to:
- Create a trust or amend an existing trust;
- Make gifts;
- Change existing rights of survivorship, or create new ones, for certain types of assets;
- Change beneficiary designations on assets;
- Delegate his or her duties and powers as agent to another person; and
- Waive the rights of a beneficiary under certain types of retirement plans and annuities.
Since the exercise of these powers would give an agent an enormous amount of control over the principal's assets, it might seem as if the simplest course of action would simply be not to grant them. However, under some circumstances, the ability to exercise "hot powers" could actually be beneficial for the preservation of the principal's assets. If you are planning to grant powers of attorney, discuss your goals with your estate planning attorney to see if it makes sense to grant your agent "hot powers."
If you are an agent under a power of attorney, or are considering accepting appointment as an agent, it is a serious responsibility. If you have questions about what you would be undertaking, contact an experienced Ohio probate attorney.
You may also be interested in: