7 Actions a POA Agent Should Avoid

Except in the case of an emergency, an agent acting under a general power of attorney should never, never, never:

Use cash from the principal’s account for any purpose, unless and only if receipts with full explanations are kept to account for every penny. And then, this should the exception, not the norm. It’s always more appropriate to use checks payable directly to the vendor.

Use personal funds or a personal credit card to buy things for the principal or pay debts for the principal. Reimbursements to the agent can lead to a full disclosure of the agent’s personal bank account and credit card records.

Comingle the agent’s and principal’s funds. All records for a comingled account will be fair game, which means that the agent’s personal business will be open for discussion.

Fail to keep receipts for all expenditures. This is one of the quickest ways to become personally liable to reimburse the principal’s estate.

Not keep those with an interest informed as to the financial status of the principal. If funds are running short, the agent should make sure all involved are given the opportunity to contribute before using personal funds to supplement the shortage.

Pay himself for time and effort unless the principal explicitly agreed to it in a very specific agreement signed by the principal and notarized.

Make purchases for the agent and the principal as part of the same transaction. No transaction is too small to do otherwise.

The end result of doing any or all of the above will be strained, if not broken relationships, and perhaps personal reimbursements for transactions that cannot be justified or documented.

All this may seem extreme and many agents believe their family would never question their actions, but it happens. The unfortunate part is that challenges or requests for an accounting may not happen until after the death of the principal, which could be years later.

And the burden of proof is on the agent. Documentation and third party verification will likely be required to carry the day. Verbal explanations will not be sufficient in a court; the most an agent could hope for is that it would be sufficient in an informal setting, such as a family meeting. So the best course is to keep meticulous records.

Keep in mind that documentation will not save a transaction that was improper from the inception.

The bottom line is that agents stand in a fiduciary relationship to the principal and must act accordingly. Be prepared. Don’t let convenience be the motivation. Documentation should be.

See our Wills and Estates/Probate Planning page for more information on powers of attorney.