What responsibilities will I have as an Agent?
The most important thing to remember when you step in as Agent is that the assets you control are not your assets. You are safeguarding them for the principal for whom you are the agent under the power of attorney and for the beneficiaries of the principal’s estate.
As an Agent, you have certain responsibilities. For example:
• You must follow the instructions in the power of attorney document.
• You cannot mix the principal’s assets with your own. You must keep separate checking accounts and investments in the name of the principal but with you as agent. Use the social security number of the principal for the account to assure that any tax documents like Form 1099s bear the name of the principal and not your name.
• You cannot use the principal’s assets for your own benefit (unless the power of attorney authorizes it).
• You must treat the descendants of the principal the same; you cannot favor one over another (unless the power of attorney says you can).
• The principal’s assets must be invested in a prudent (conservative) manner, in a way that will result in reasonable growth with minimum risk.
• You are responsible for keeping accurate records, filing tax returns and reporting to the probate court if a petition is filed requesting an accounting.
Make a preliminary list of the principal’s assets and their estimated values. You'll need exact values later. If the principal has a spouse or dependent children, the Agent may need to do some tax planning right away. Be sure that you have the principal’s social security number and date of birth because you will need them for many transactions.
Collect all checks payable to the principal and put them in an interest bearing account. If a spouse or a dependent child of the principal needs money to live on, you can probably make some partial distributions. But do not make any distributions until after you have determined there is enough money to pay all expenses for the principal, including taxes.
Notify the bank, brokerage firm and others that you are now acting as Agent of the principal under a Durable Power of Attorney. They will probably want to see an original or certified copy of the power of attorney and your personal identification such as a driver’s license.
Keep careful records of medical and household expenses and file medical claims promptly. Keep a ledger of all bills and income received. Contact an accountant to prepare income tax returns, if you will not prepare them yourself. Verify and pay all bills and taxes. Make an accounting of assets and bills paid and give it to the principal at least quarterly if the principal can review them.
Do I have to do all of this myself?
No, of course not. Once you have custody of the principal’s assets, you can have professionals help you. You can hire an accountant to prepare tax returns and answer income tax questions. You will also need to consult with an attorney from time to time to help interpret the power of attorney and answer legal questions. You may want investment counsel to provide portfolio management. However, as Agent, you are ultimately responsible to the principal and the beneficiaries of the principal’s estate for prudent management of the principal’s assets.
What do I do when the principal dies?
Your power as Agent ends when the principal dies. If you know that the principal will die relatively soon make sure all of the paperwork is in order to turn over the finances to the Executor of the principal’s estate.
Inform the family of your position and offer to assist with the funeral. Read the principal’s estate planning documents and look for specific instructions on whom will take over your duties as Agent. Is there an Executor? Is a Trustee named as beneficiary of any assets? Prepare a report of what you have done as well as any final invoice for your services if you were being paid for them.
Once you turn over control of the assets to the Executor, you're finished and your responsibilities end. As Agent, you have the power to file an accounting in the probate court. The court decree approving the accounting will release you from liability as Agent under the Durable Power of Attorney.
Should I be paid for all this work?
Agents are entitled to reasonable compensation for their services. The power of attorney document may give guidelines on your compensation. Look at local corporate Agent fee schedules to help determine what you think would be reasonable compensation and make sure that the beneficiaries of the principal’s estate understand how you will charge. Beneficiaries hate surprises. Remember that you will have to pay income tax on the compensation you receive as Agent.
What if the responsibilities are too much for me?
Consider hiring an attorney, bookkeeper, accountant or corporate Trustee to help you once you have custody of enough assets to pay them. For instance, a corporate Trustee can manage the investments and do all of the recordkeeping for a fee. If you feel you cannot handle any of the responsibilities due to work, family demands or any other reason, you can always resign and let the successor Agent step in. If no other successor Agent has been named, or none is willing or able to serve, a probate court can always appoint a voluntary conservator to succeed you.