Are you concerned about the actions of a fiduciary acting under a Power of Attorney?
There are many instances where someone will come to my office who has concerns about how another party (agent) is managing their funds or the funds of a family member (principal). Unfortunately, many times the concerns are well-founded and the agent is not living up to their fiduciary duties.
It’s possible that the agent simply has poor financial judgment themselves. However, all too often we see cases where the fiduciary is acting in their own self-interest and not for the benefit of the person to whom they owe a duty. In both of these instances, it sometimes becomes necessary to strip the agent of their powers and duties under the power of attorney.
I recognize that there is a family element to each one of these cases. It’s possible that the agent is acting up to their fiduciary duties, but is not transparent with others. Family members will always think that they could be doing the job better. The test is not necessarily whether someone else could do it better; rather, the main points to consider are whether the agent is acting in a) good faith and b) for the benefit of the principal.[i] There are more duties to consider, but these are the principal considerations. Most of the additional rules relate to these two.
Agent’s should keep financial records and receipts.
For example, an agent also should keep meticulous records and receipts. How can you prove that an expenditure is for the benefit of the principal if you don’t have any receipts? Going even further, is there evidence that the principal would have even wanted that purchase to be made in the first place. Time and again, many of these types of disputes occur where the agent is making elaborate gifts to other family members with the principal’s money.
Agent’s should possess the resolve to act for the benefit of the principal.
The example above leads us to another important consideration. Sometimes the agent needs to be strong enough to say “no” to the principal. What if the principal has diminished capacity and is making demands for expenditures which are unreasonable given the principal’s dwindling assets? In these instances, the current agent may simply lack the resolve to act for the benefit of the principal. This is a very common occurrence and it is never easy to reject a parent’s request. It can also lead to situations where the principal begins telling others that the power of attorney is no longer valid.
Agent’s should avoid self-dealing or the appearance of conflict of interest.
Additionally, an agent should not make decisions in which the agent has a conflict of interest. An example would be where the agent stands to benefit personally from the decision and that becomes the motivating factor for the decision. This does not mean that the agent is barred from benefitting along with the principal. If this happens, the agent may run into problems if challenged whether the decision is truly for the benefit of the principal.
Fiduciary litigation is fact-specific.
These types of fiduciary and power of attorney cases tend to be very fact specific. Once again, the test is not whether someone can do it better. To remove an agent, you have to show that they have breached their fiduciary duty to the principal. Contact my office if you would like to discuss your case further. There may be more than one solution.
[i] See Virginia Code Sec. 64.2-1612 (defining various duties of an agent).