“It’s easy to see how an advisor could feel they were doing the right thing”, Steve Garmhausen explains in Financial Advisor, describing a situation where a financial advisor acted as Power of Attorney for a client. When an advisor at an SEC (Security and Exchange Commission)-regulated firm acts in a position of trust, that can open an advisor to “charges of fraud or breach of fiduciary duty. For that very reason, most firms ban advisors from “stepping into a position of trust’ with their investment and wealth management clients, and “examiners keep a sharp eye out for problems within such relationships”.
Positions-of-trust relationships include:
- trustee
- executor
- conservator
- power of attorney
Under Indiana law, the person granted the power (called the agent or attorney-in-fact) must act with the “utmost good faith, loyalty, and care”, taking no actions to use the principal’s (the person who granted the power) money or property for their own gain. The agent must:
- track all transactions
- track all expenditures
- document all decisions made on behalf of the principal
- keep his or her own funds and property totally separate from that of the principal
- act in accordance with the principal’s wishes (if those are unknown, then in a way any prudent person would manage their own property)
Different “positions” for which you might need to appoint “agents” (people to whom you give Power of Attorney) to take care of your affairs include:
- executor of your will
- trustee of a trust.
- financial power of attorney.
- health care power of attorney
- an agent to take care of your digital assets.
Just as you would do after hiring an employee for your business, you will need to give each of these agents the proper tools and access to the information they will need to perform their duties on your behalf. Each may need access to your birth certificate, social security number, the contact information to advisors such as your attorney and accountant. The agent for your digital assets will need to know passwords and user names for your different online accounts. Your healthcare power of attorney will need contact information for your doctors and your health insurance/ long term care insurance providers as well as a list of any medications you take.
At Geyer Law, we explain to our estate planning clients that being your attorney and being named as your power of attorney are two separate things. Those positions must be held by different people.
- Your estate planning attorney provides legal counsel, making sure your documents are properly prepared in accordance with state and federal law, helping you clarify your goals for yourself, your family members, and any charitable interests you have that you want included in your plan.
- Your Power of Attorney agent (also known as your “attorney-in-fact”) is the person who “steps into your shoes” to make financial, legal, or medical decision: if ever you cannot (because you have become incapacitated).
Your estate planning attorney and your attorney-in-fact have different jobs to do. You need them both.
– by Ronnie of the Geyer Law blog team
