Record Keeping Responsibilities of Agents Acting Under a Power of Attorney

Agent’s financial record keeping responsibilities while acting under a power of attorney for property

The power of attorney document creates a legal relationship between the grantor and their appointed agent. Within this relationship, the agent is entrusted to make decisions on behalf of the grantor. This article will focus on the agent’s recording keeping responsibilities while acting under a power of attorney for property. Agents acting under a power of attorney for personal care have a different set of recording keeping responsibilities. 

Property vs personal care 

The responsibilities granted under a power of attorney can be limited to specific issues or widely comprehensive. The grantor may appoint their agent to make decisions over a singular issue or almost every aspect of the grantor’s life. There are two types of power of attorney: (1) power of attorney for personal care; and (2) power of attorney for property. “Power of attorney for personal care” refers to the document that authorizes the agent to make decisions on behalf of the grantor regarding the grantor’s physical needs (e.g. shelter, nutrition, health care, hygiene, clothing, lifestyle, etc.). “Power of attorney for property” refers to the document that authorizes the agent to make decisions about the grantor’s finances and gives the agent the ability to transact money and property on behalf of the grantor. 

Powers of attorney for personal care and property place immense power in the agent’s hands. The agent’s power must be exercised diligently, honestly, in good-faith, and with integrity. The Substitute Decisions Act governs the financial management of the grantor’s property and requires the agent to keep accurate records of all property and financial transactions made on behalf of the grantor. Agents must be able to show that these transactions are in the grantor’s best interest. 

The importance of record keeping 

A power of attorney for property can be used any time the grantor loses the capacity to make decisions (e.g. if the grantor becomes mentally incapacitated or is in another country for an extended period of time). When a power of attorney for property ends due to the grantor’s death, individuals that were close with the grantor (such as beneficiaries under the grantor’s will) often ask for an accounting of the grantor’s assets during the grantor’s incapacity. If the grantor revokes the power of attorney and regains capacity, the agent will be expected to provide the grantor with a full accounting of their financial activities. Financial record keeping is key to avoiding and defending accusations against the agent for financial mismanagement and breaching their fiduciary duty. 

Record keeping requirements while acting under a power of attorney for property 

The grantor’s financial records must be kept readily available at all times with full supporting information^[1]. The Substitute Decisions Act provides some guidance on the Agent’s basic record keeping requirements[2]: 

1. Agents must record a list of all the grantor’s assets and liabilities at the date when the agent first began acting under the power of attorney for property. This includes, but is not limited to: land, money, bank accounts, investments and securities, vehicles, personal property, etc. 
2. Agents must keep up-to-date records of assets acquired or disposed of on behalf of the grantor. These records must include the name of every party they transacted with, the date of the transaction, and the amount and interest rate of money invested on the grantor’s behalf. 
3. Agents must record the reason for every transaction and be able to justify it in the grantor’s best interest. 
4. Agents must record all money received and spent on behalf of the grantor, including the amount, date, who it was paid towards or received from, and account particulars. 
5. Agent must record all investments made on behalf of the grantor; including the amount, date, associated interest rates, the type of investment, and supporting contractual information. 
6. Agents must keep a record of all the liabilities incurred or discharged by the agent while acting under a power of attorney. 
7. Agents must record all compensation received for acting as attorney, including the amount, date, and calculations justifying the total compensation. Agents must also record the list of all asset values used to calculate the Agent’s fee. 
8. Agents must include with their accounting records: a copy of the power of attorney for property document, any management plans in place, and court orders relating to the agent’s authority or management of the grantor’s property.

Agents must keep financial records on hand until their duties are discharged by the court on a passing of accounts^[3]. Furthermore, the agent must have proper accounting in order to receive compensation for their services rendered under the power of attorney.

Agents must be careful when transacting on behalf of the grantor. Failing to manage the grantor’s property and finances in accordance with their instructions, management plans, or court orders constitutes a breach of the agent’s fiduciary duty. Breaching their fiduciary duty exposes the agent to liability and potential sanctions.  Also, an agent will be denied compensation for acting under the power of attorney if they are found to have breached their duties. 

The law places strict requirements on the records kept by an agent acting under a power of attorney for property. Lawyers can assist agents by determining if their financial records are in compliance with the law and advise how record deficiencies can be corrected. Agents should proactively keep detailed, thorough, and up-to-date financial records regarding the grantor’s state of affairs- in the event that the agent’s transactions come under scrutiny, proper record keeping will help protect the agent against legal claims. 

SmithValeriote welcomes the opportunity to guide you through the process of creating a power of attorney or answering any questions that you may have regarding the agent’s obligations. 

Written by Ben Baena, edited by Jennifer Trommelen-Jones.

Tags: Wills and Estates, Power of Attorney, Substitute Decisions Act