Residents in California know that it’s always a good idea to have a power of attorney, or POA, specifically provided in one’s estate plan documents. It is crucial for people to have a designated representative appointed in advance, in case a person becomes incapacitated or otherwise unable to make important decisions for which they are responsible.
A power of attorney can be used for health care decisions and other end-of-life issues, but they may also be used to cover a person’s power over financial and business matters. In such instances, it’s important that the designated representative be someone whom the person trusts deeply, and who can make important and complex decisions on their behalf.
The designated representative, or attorney-in-fact, in a financial transaction, has several duties. Their many duties is to act according to the POA’s directives, and to act with the standard of care that a prudent person dealing with the property of another would exercise.
If the attorney-in-fact has specialized skill, they must still act prudently as a similarly situated person with such skills would act. Failure to observe the standard of care may represent a breach of duty by the attorney-in-fact, opening up the attorney-in-fact to potential liability, including financial losses, lost profits, and depreciation of property value.
However, proving that an attorney-in-fact breached their duty is often quite difficult under the loose definition provided under California law. Rather than try to prove a designated representative breached their duty, it is best to try to avoid getting into such a situation in the first place. A person accepting a power of attorney should always be trustworthy, honest, skilled, and able to act wholly for the interests of the incapacitated principal. T
hose with selfish or questionable motives or behaviors should never be trusted with the delicate and important task of acting as an attorney-in-fact. An experienced California estates and trusts attorney can help people draw up the necessary legal documents, as well as provide guidance when it comes to the selection of the designated representative.
Source: California Code, “Powers of Attorney,” accessed Oct. 11, 2014