Power of Attorney red flags

The fiduciary responsibility of an agent (under power of attorney) or trustee is serious and often a difficult and thankless job.  The role also provides a mechanism for an agent (adult child, friend, trusted adviser, etc.) to take extreme advantage of the principal (aging parent, developmentally delayed adult, etc.). A fiduciary is required to act in the principal's "best interest". Protecting our family, friends, neighbors and community from elder fraud, abuse and neglect is up to all of us. Do your friends and loved ones a favor and watch out for red flags including:

• Principal expresses dissatisfaction with agent's execution of his/her duties (but isn't willing or able to speak up for themselves),
• decreased capacity of principal,
• isolation of principal by agent,
• agent refuses to share health or financial information with others typically involved in principal's activities (although an agent isn't typically required to disclose any of this information, it can go a long way to ease family insecurity and tension as long as the principal approves),
• agent pays for personal expenses from principal's assets, and
• agent pays himself/herself unreasonable fees for acting as fiduciary.

On the flip side, acting as the agent, you should always be alert to the potential liability you face from future beneficiaries, family members, and the principal himself/herself.  Even when the principal passes away, you may be called on by the personal representative (executor) of the estate to account for money and assets you managed under a power of attorney.  Protect yourself from claims by putting the following steps in place from the onset of your duties:

• keep money and assets of the principal separate from your own,
• keep all receipts for expenses,
• don't pay for your own expenses with the principal's money and call it "reimbursement" for your time and efforts (instead, write a check to yourself and make it clear that it is payment for services),
• account for all assets that come under your management,
• keep track of specific reasons for your actions (Why was it better for mom that you sold her home? Why did mom need/want a new car? Why did you choose to use a different financial adviser or accountant than mom had been using before?)
• keep records of the time you spent acting as agent (date, time, activities), so you can defend your fees if necessary.

The law regarding powers of attorney has been updated in Washington, effective January 1, 2017, with a number of changes.  Make sure your documents are up-to-date and if it has been over five years since you had them drafted last, it is a good idea to get them redone. If you are acting as an agent and have questions regarding your duties, rights, or liabilities, please contact our office.