A General Power of Attorney (or in common parlance, a “POA”) document is a fundamental part of an estate plan, and offers many potential benefits. I’ve previously blogged about their importance and usefulness as an estate planning tool, so if that’s the kind of info you’re seeking try here.
Today, however, I want to touch on one of the most often ignored legal issues surrounding POA’s, or a least ignored until it’s too late: the responsibilities of the person named in the POA as the “attorney-in-fact.”
We often hear something similar to the following hypothetical from prospective clients: “Mom made me her POA, and I’ve since been managing her finances. Now my sister/brother is acting very suspicious of me and asking for copies/bank statements/etc.” I’ve seen this movie so many times, I have the script memorized.
Generally, when a child takes over management of a parent’s finances using a POA, they don’t seek any legal counsel before acting. Instead, they simply contact the bank or financial institution, provide the copy of the POA, and are off and running. They seldom have any nefarious intent, and usually are genuinely desirous of using the POA only to act in the parent’s best interest, but good intentions can only get you so far.
It’s important to know that acting as someone’s attorney-in-fact creates legal obligations and fiduciary duties that must be performed pursuant to Indiana Code. If I wanted to end the blog post right now, the mic-drop statement on this issue is this: If you are named in someone’s POA as their attorney-in-fact, obtain advice from legal counsel before acting.
To give you a little more insight as to why that’s important, let’s revisit the scenario I started above: Daughter begins acting as Mom’s POA, Son begins getting suspicious of Daughter’s activities and starts poking around for more information. Let’s assume daughter has been acting in perfect compliance with the terms of the POA document and Indiana’s code in conducting the actual transactions of paying Mom’s legitimate bills. Mom then dies or is declared incompetent, Son goes to see an attorney and, shortly thereafter, Daughter receives a frightening-looking legal document in the mail: a formal request for an accounting.
Let’s suppose Daughter managed Mom’s money with only the best of intentions, but didn’t keep detailed written records of every transaction that she made in so doing. Under Indiana’s statute governing Power of Attorney documents, Daughter is under an obligation to “keep complete records of all transactions entered into by the attorney in fact on behalf of the principal: (1) for six (6) years after the date of the transaction; or (2) until the records are delivered to the successor attorney in fact; whichever occurs first.
In addition, Daughter will be required to prepare and provide a written accounting upon request of the prinicipal (Mom, in this hypothetical), a child of the principal (Son, in this hypothetical), a guardian appointed for the principal, or, upon the death of the principal, the personalrepresentative of the principal’s estate, or an heir or legatee of the principal (or if otherwise ordered by a Court).
Finding out later that you should have been keeping detailed records of every transaction and are now being ordered to produce a detailed accounting of every transaction undertaken in the can be a terrifying situation. There are many other fiduciary duties imposed on POA’s under Indiana law, but this hypothetical vignette should be enough to get across the real point of this blog post: If you are named in someone’s POA as their attorney-in-fact, obtain advice from legal counsel before acting.
If you have questions or concerns about POA’s, estate planning documents or their resultant fiduciary obligations please feel free to contact us at (317) 575-8222 to schedule a consultation, or consult with an experienced attorney in your jurisdiction. As always, it’s far cheaper and easier to obtain advice before acting than to try to rectify mistakes later. You can also always check out our website for more information: www.halcombsingler.com