Can You Incur Liability for Acting as Agent under Power of Attorney?

Can You Incur Liability for Acting as Agent Under Power of Attorney?

No good deed goes unpunished. Recognizing the veracity of that aphorism is a fundamental in estate planning, especially in regards to putting someone in a position of trust.

For example, if someone is named as agent under power of attorney, they do not have to act. If they do decide to act on behalf of the person naming them, they must abide by a duty to act in the best interest of that individual. The agent is essentially volunteering their time to ensure the best interests of the principal.

Serving as Someone's Agent

At first glance, this appears to be a rather one sided affair. Whoever is named as agent is, as it appears, assuming a potential burden. In recognizing the potential for a zero sum relationship between the parties, proper estate planning does what mediation attempts to do – instill a sense of balance.

Time Commitment

Many people who are named as agent under a power of attorney are concerned about the time they must dedicate to the position. Depending on the health of the principal, the agent may need to assume all the daily tasks, like managing finances and filling prescriptions, that the principal would normally do for themselves. Additionally, depending on the assets and/or business interests of the principal, the activities can range from a straightforward running of a household to a more complex running of a business or investment portfolio.

The Question of Compensation

The question on the mind of any agent in these scenarios would be: do I get compensated for this?

The answer is yes.

A well-written power of attorney will provide for reasonable compensation for actions taken by the agent acting in that capacity. Further, the power of attorney should also contemplate the need for the agent to be reimbursed for reasonable expenses incurred while acting on behalf of the principal. Together, these provisions aim to make the agent whole for advancing any costs and dedicating their time.

The Question of Liability

The other main concern an agent may have is: Am I liable for anything the principal becomes liable for?

For example, let’s say an agent is acting on someone’s behalf and that person incurs substantial medical debt, does the agent likewise become liable for this debt?

The answer is no.

The principal has a contractual obligation to pay their expenses. However, the agent is not a party to the contract (unless specifically listed). The only caveat to this is of the agent either personally guarantees the payment or if they misappropriate the funds of the principal, which could have otherwise been used to pay debt.

Final Thoughts

The key take away for any person named agent under power of attorney is, don’t be afraid to be punished for any good deeds done for the principal.

If you are in need of a power of attorney document or have questions about your roles and liabilities as agent, schedule a free consultation with McIntyre Elder Law.