Serving as Agent

Serving as Agent

By: Martin M. Shenkman, CPA, MBA, JD

No, we're not talking about your being Tom Cruise's agent to negotiate a contract for Mission Impossible IV. We are talking about your Aunt Nellie who was just admitted to a nursing home, and although sometimes lucid, needs help managing her affairs. Under her durable power of attorney, you were named agent, and it is now your responsibility to take care of her financial matters.

While your family is a regular Brady Bunch, you are worried that your sibs, Anastasia & Drizella, may not feel comfortable with you controlling money they view as their future inheritance. What can you do to help Aunt Nellie and protect yourself? Meet a lawyer to review your responsibilities under Aunt Nellie's power of attorney. The cost is probably a legitimate expense to pay from Aunt Nellie's funds. Set up a file system and diligently record and document everything. The following is a list of the tabs you should set up in a binder to keep everything organized, and what should go in each. You can take these notes and files and show them to Anastasia and Drizella to show where the missing monies went.

The original Power of Attorney: Make numerous copies of the Power of Attorney you are operating under (you will need copies for every bank or other person you deal with). Safeguard the original you are in possession of and find out if there are other originals in existence. For instance, did the drafting attorney retain an original? Does Aunt Nellie have an original in her safe deposit box or under her mattress? Does the alternate agent named after you, if there is one, have an original?  

Cliff's Notes: Keep in your binder any notes you made and/or annotations to the Power explaining your role as agent based on your meeting with an attorney (taking a step backwards, don't forget to take notes when you meet with an attorney about your role as agent!).

Effective Date: Some powers of attorney are effective when signed; others require you to have one or more doctors' letters stating that Aunt Nellie cannot take care of her affairs. Banks or others may have you sign a statement (affidavit) attesting to the validity of the power. Save copies in your binder. It might even be helpful for you to have Aunt Nellie's lawyer prepare an affidavit for you to sign to give to people to encourage their acceptance of the power. Whatever the requirements, document that you can serve and save the proof.

Contracts: If you sign a contract for Aunt Nellie (e.g. with the cable television company so she doesn't miss an episode of Survivor) copy the contract as you signed it for the binder. Make notations as to why you signed the contract (e.g., to keep Aunt Nellie entertained), and state the provision in her power of attorney that gave you the authority to do so.

Legal Actions: Is Aunt Nellie a party in any civil or criminal proceedings? If she is, contact any attorney that Aunt Nellie is working with or has retained so they are aware of her situation.Failure to do this may cause Aunt Nellie to lose the opportunity to pursue an action (i.e., failure to toll the statute of limitations), or may cause a default judgment against her for failure to produce a timely response or to appear in court.

Checks: Copy every check you write (or get carbonless copies called safety checks) and staple the bill you paid with to the copy of the check. File them in the binder in check number order.

Deposits: Keep a copy of every deposit in chronological order. Identify the source of any deposits. You should review prior bank statements and tax returns with Aunt Nellie's accountant to see what cash receipts you should expect. Make up a checklist so you can monitor them and verify that they have been deposited. You don't want the gardener keeping the rental payments for the tenant in Aunt Nellie's vacation home because you didn't know to pick it up.

Cash: If you withdraw cash using Aunt Nellie's bank card, be sure to have receipts and contemporaneous records as to what it was spent on. While you should avoid cash, sometimes there is no choice. Many caretakers and others will be tipped in cash. Just be prepared for the potential challenges later (yes, even from loving sibs). If possible, have a witness to the payments who will also sign off on the documentation you have.

Reimbursements: Sometimes you can't avoid paying for something yourself. Aunt Nellie needed her Twinkie fix and the corner newsstand wouldn't take a check. You can reimburse yourself for appropriate expenditures, but keep detailed contemporaneous records and copies of receipts to support each reimbursement. Bear in mind that anytime you reimburse yourself for a cash expenditure, the sibs' lawyer will accuse you of having used the money for yourself.

Gifts: Many but not all powers permit gifts to be made. Be sure you have the authority to do so, and that you understand any limitations or restrictions. Document all gifts, why they were made, and to whom. Be very careful if you make gifts to yourself or your heirs. Verify that you can with an attorney. Document everything. Carefully consider any gifts that aren't equal to all heirs as they may be the basis for lawsuit in the future.

Accountings: Consult with an accountant periodically and have a summary of cash flows completed along with bank statements reconciled. Having an independent accountant do this, at Aunt Nellie's expense, will give more independence and credibility to your actions and have you prepared to complete a formal accounting if a court ever requires it (it may!).

Communication:While you may be under no obligation to explain actions as an agent when times are good, it is a good idea to have full disclosures to any interested party (e.g., your loving siblings or cousins).  Let them know what you are doing.Periodically send them your accountings so they know what is going on.The best defense is an offense.If you are dragged into court to explain your actions, having made good-faith disclosures voluntarily may go a long way to show your good intentions.

Good luck serving. You'll get Brownie points, but remember "no good deed goes unpunished" so be prepared.

Our Consumer Webcasts and Blogs

Subscribe to our email list to receive information on consumer webcasts and blogs, for practical legal information in simple English, delivered to your inbox. For more professional driven information, please visit Shenkman Law to subscribe.

Ad Space