Previously I wrote about how the use of a Durable Power of Attorney can enhance the financial management of your assets while simultaneously avoiding unintended consequences, and how a Durable Power of Attorney can play an important part in meeting your personal health care needs. Clearly a Durable Power of Attorney is an important and powerful tool to have as part of your estate plan, but the effectiveness of this tool is based upon the skill of the person who wields it.
In Florida the person authorized to act under a Durable Power of Attorney is called an “Agent”, whereas the person granting the authority (the person signing the Durable Power of Attorney) is called the “Principal”. According to the Florida Power of Attorney Act, the Agent is a fiduciary and when acting on behalf of the Principal must: (1) consider what is in the best interest of the Principal; (2) act only within the scope of the authority granted; (3) act in good faith and with loyalty to the Principal; (4) avoid creating a conflict of interest; and (5) act with competence and diligence in the performance of their duties. If the law has high expectations of a person acting as an Agent, so should the Principal. When considering who you will appoint as your Agent, keep in mind the following:
1. Appoint an Agent who already demonstrates financial responsibility in their own life. Most horror stories about the misuse or abuse of a Durable Power of Attorney come from situations where the Principal appointed an Agent who is financially incompetent or malicious. Keep in mind an Agent has access to your money, meaning they could use your funds to pay their own debts or supplement their lifestyle without you knowing until it is too late. Even if they do not use your funds to meet their own personal needs, if they are not managing their own money well then how are they going to assist with managing yours. Recently I came across a situation where a mother appointed her son as Agent despite the fact he had a long history of money mismanagement – he was even going through a bankruptcy when the mother appointed him as her Agent. When the mother became ill and the son had to step up to handle her finances he made mistakes regarding the payment of her bills resulting in late charges and penalties, moved money into investment accounts that were too risky, and failed to pull his mother’s required minimum distribution from an IRA resulting in a 50% tax penalty. I sincerely believe the son loved his mother and was doing his best to help her, but he was not financially competent enough to serve as her Agent.
2. How far away you live from someone else should not be the biggest factor in deciding who to appoint as your Agent. Due to online banking, Zoom meetings and the general advancement of technology, an Agents distance from you is nearly immaterial to properly managing your assets. Even though you may not use various “online” features provided by your bank, there is no reason your Agent would not be able to. In fact, you should consider appointing someone who is capable of handling online banking and bill pay because these features offer the ability to track and monitor transactions on an almost daily basis versus waiting for a monthly bank statement to arrive.
3. If appointing a child as Agent, do not base your decision on who is the oldest or whether a child may be offended. The appointment of a child as Agent makes sense from the standpoint you and they have a bond that goes well beyond mere friendship so you may feel more comfortable speaking with them about your personal financial matters. When choosing a child to serve as Agent your decision should be based on their skill at managing their own finances. Nonetheless, I repeatedly encounter people who insist on appointing a certain child because they “don’t want to offend” that child, or because that child “is the oldest”. I am not suggesting that picking one child over another is easy or should be done with callous indifference, but keep in mind that the central issue is not what someone else feels but what will happen to you and your finances should you become ill and require assistance. A Durable Power of Attorney
should be drafted so it: (1) contains “Durable” language that keeps the Power of Attorney in effect even if you become incapacitated; (2) contains the Florida recommended language regarding banking and investment transactions; (3) identifies multiple people (in successive order) authorized to act as your agent(s); (4) grants “enumerated” authority for agent(s) to perform certain tasks; and (5) is executed with the formalities required by law. If properly done your family will have one less stressful matter to address if you become medically incapacitated.
A Durable Power of Attorney is an important and powerful document that can be used to benefit you greatly if you become incompetent, ill or just decide you need some assistance. Therefore, to ensure a Durable Power of Attorney is used wisely you need to appoint an Agent who understands what is required of them, who will comply with the duties set forth in the Florida Power of Attorney Act, and who demonstrates financial responsibility in their own life. If you have questions about your Power of Attorney or need to change who is named as your Agent, contact me today to set up a complimentary appointment to discuss.
If you have questions about your existing Durable Power of Attorney, or need to add one to your estate plan, give me a call today. John T. Marshall, Esq. and Marshall Law, P.A. can assist you with addressing the issues raised in this article, or any of your Estate Planning, and Estate Administration needs. For more information or to schedule an appointment contact Marshall Law at (352) 432-8859.
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