So someone (principal) appoints you his/her agent under a Power of Attorney (“POA”). You understand the basics that you have been given the authority to handle affairs on the person’s behalf but what exactly does that mean? Are you liable for anything now that you have been appointed?
Unfortunately, often individuals create POA’s and appoint their children but fail to involve the children in the process. Even more concerning is the reality that the individual never looked into what authority he/she was delegating in his/her POA. As you can imagine, this may lead to several issues for the person acting as his or her agent.
In order to protect the principal, New Jersey law states that an agent under a valid POA is a fiduciary. As a fiduciary, the agent owes the principal the duties of loyalty and care to act in the principal’s best interest. This means that when you act as an agent for someone you must be acting for his/her benefit in a way that a reasonably prudent person would act in the same situation.
In order to ensure that the agent is acting in the principal’s best interest, New Jersey imposes a duty to account on the agent. The agent must keep a record all of actions he does on behalf of the principal. This accounting can be done either formally or informally and the principal has great discretion to request whichever type of accounting they desire. If for some reason the principal suspects that the agent is not acting in his/her best interest, he can demand an accounting to review how the agent has acted on his/her behalf.
So how do you protect yourself as an agent? READ THE DOCUMENT! The state of NJ does not follow a statutory form for POA’s. This means that every POA can govern different actions. Some POA’s terminate upon the principal becoming incapacitated, others survive incapacity. Certain POA’s cover only a specific transaction like a real estate transfer, while others cover banking and investments as well. The first step any agent should take is to carefully read the document to see exactly what powers were given to the principal and for how long. If you have any specific questions, you should consult with an attorney.
When does the responsibility of an agent under a POA end? If the POA was only for a single transaction the agent’s responsibility ends at the completion of that transaction. Every POA will state when the agency terminates. Regardless, all POAs terminate at either the death of the principal or the principal’s revocation. A POA can be revoked by either the principal physically destroying the original or by the principal executing a subsequent POA that expressly revokes all prior POAs. As a law firm, we always recommend the principal notify the agent of any revocation.