Recently I’ve had several clients who are intimidated by the amount of power their power of attorney (or trustee) has.
Which is truly understandable, once you authorize an agent or attorney-in-fact to act under a power of attorney or a trustee to act under a trust, you are essentially giving them control over your assets. This normally includes the power to make decisions over investments, write checks, and sell property. Without oversight.
Legally, your agent or trustee acts as a fiduciary; meaning, they have to act in your best interests. However, just because a person is told they have to act in your best interests doesn’t mean they will. So how can one ensure that their agent or trustee will actually act as they would want?
First, there is always the threat of a law suit. You certainly hope that the person you are trusting with all of these powers would not need to be sued. But it is a real threat. In addition, when an agent abuses their power, they are personally liable if they do not act in your best interests. This means they are really putting their own assets on the line if they act improperly.
So if they truly start abusing the power or stealing, your other loved ones can sue the agent. This leads to another very important provision. Accounting and reporting. If you put one person in charge of your finances, it’s wise to also require that person to report to others who have an interest in your estate. For example, if you make your oldest child the agent, all of your children would have the right to know what is occurring with your finances.
These combined tactics are normally enough to dissuade an agent from acting improperly. However, if someone is really abusing your power of attorney, it is likely only a law suit will stop them. And that thought is absolutely a frightening one. But if you do not create a power of attorney, it’s likely the court will become involved anyway. And do you trust the person you choose or the person the court appoints?