In Pennsylvania, the agent named in a power of attorney document has certain legal duties to fulfill. If the agent fails to meet his or her legal duties, he or she may be removed as POA and could be financially liable for damages. Some legal duties are mandatory and cannot be avoided by language in the POA document, and some legal duties can be limited or eliminated depending on how the power of attorney is written.
Regardless of any provisions in the power of attorney document as written, an agent under a Pennsylvania financial power of attorney who has accepted the appointment as POA must meet the following duties:
- Act in accordance with the principal’s reasonable expectations to the extent actually known by the agent and, otherwise, in the principal’s best interest.
- Act in good faith.
- Act only within the scope of authority granted in the power of attorney.
Modifiable Legal Duties
Pennsylvania law specifies that certain duties of an agent under a POA can be changed depending on how the power of attorney document is written:
- Keep the agent’s funds separate from the principal’s funds unless:
- The funds were not kept separate as of the date of the execution of the power of attorney; or
- The principal commingles the funds after the date of the execution of the power of attorney and the agent is the principal’s spouse.
- Act so as to not create a conflict of interest that impairs the agent’s ability to act impartially in the principal’s best interest.
- Act with the care, competence and diligence ordinarily exercised by agents in similar circumstances. Some power of attorney documents lower the standard of care so that the agent would not be held liable for mistakes of ordinary negligence, but would still be held liable for damages caused by dishonesty, gross negligence, or willful misconduct.
- Keep a record of all receipts, disbursement and transactions made on behalf of the principal. Even if the power of attorney document purports to reduce the record-keeping requirement, the person acting as agent under the power of attorney should always maintain meticulous financial records. This includes copies of all financial statements and receipts or copies of bills paid.
- Cooperate with the person who has authority to make health care decisions for the principal.
- Attempt to preserve the principal’s estate plan, to the extent actually known by the agent, if preserving the plan is consistent with the principal’s best interest based on all relevant factors. These factors include the value and nature of the principal’s property, the principal’s foreseeable obligations and need for maintenance, minimization of taxes (such as income, estate, inheritance, and gift taxes) and eligibility for a benefit, program or assistance under a statute or regulation such as Medicaid long-term care benefits.
If you do not meet your legal duties when serving as financial power of attorney, you could be removed by the court, or even face personal liability if there are financial damages caused by the breach of fiduciary duty. It all begins with the drafting of the power of attorney, and the agent needs to review the document carefully before exercising the authority in it. When in doubt, acting honestly and in the principal’s best interest and maintaining meticulous financial records will tend to get the agent through most situations. The safest path, and recommended course of action, is to consult with a knowledgeable lawyer before using a financial power of attorney document so you know your legal duties.
Disclaimer: The above article is provided for general informational purposes only. Please do not rely on this article as a substitute for legal advice for your specific situation.