You need to be sure the person who holds your financial Power of Attorney (POA) is aware of the recordkeeping and other requirements.
POAs are relatively new, so the rules and standards have been evolving. POAs were first standardized in 1969 in the Uniform Probate Code published by the National Conference of Commissioners of Uniform State Laws. Each state decides whether or not to adopt a proposed uniform state law and can modify it.
In 2006, the commissioners proposed the Uniform Power of Attorney Act. It’s been adopted in about 25 states so far, and others are likely to adopt it soon. Even if your state hasn’t adopted the uniform law, it’s a good idea to follow it. Your state might adopt some variation of it in the future, and courts will look to it as guidance even if a state hasn’t adopted it.
A key feature the agent under your POA needs to know is the recordkeeping requirement.
The agent empowered under a POA is required to keep records of all transactions made under the POA. In addition, if a family member or other interested party requests to see the records or wants an accounting of how money was handled, the agent is required to comply. In other words, the agent under a POA is accountable to the potential heirs as well as to the principal. They can demand to review the documents at any time.
If the agent fails to provide satisfactory records promptly, family members and other interested parties can ask a court to order production of the records. Usually this is done in a probate court or family court, depending on the locality.
Some state laws can be more onerous. California hasn’t adopted the 2006 uniform law yet, but its current version of the POA law says it is a breach of the agent’s fiduciary duty to fail to keep adequate records of transactions. Once it is alleged that the records are inadequate, the agent has the burden of rebutting it in court.
Here’s why you should be sure the person named the agent under your POA knows the rules and is likely to comply with them.
If it is found that the agent isn’t acting properly, courts usually don’t appoint another family member or friend to take over as agent. Instead, the state is considered the agent for your protection. Usually that means a professional guardian or fiduciary is appointed to the role. The professional then makes the decisions on your behalf and also charges fees for acting as the agent.
In at least some states there are allegations of abuse by professional guardians in order to maximize their fees. Other allegations are that some guardians initiate court actions regarding complete strangers and their agents in hopes of being appointed guardian by the court. Even a solid, professional guardian can deplete your assets substantially through fees and other costs. For some examples of guardian abuse, visit the web site of the National Association to Stop Guardian Abuse at http://nasga-stopguardianabuse.blogspot.com/.
To protect yourself and your agent, be sure the agent is aware of the recordkeeping requirements and is able and willing to do the job.