Power of Attorney: Duties and Responsibilities

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A person who holds Power of Attorney for someone else has a legal duty to act in the best interests of their Principal (the person who gave the power). This duty can be summed up in a few words: He or she must act in good faith in handling the money and assets of the Principal. This means that the person holding the power (the Attorney-in-Fact) must always intend to serve the Principal's interests, rather than their own personal interests, when they are exercising the Power of Attorney.

The Attorney-in-Fact should keep a clear record of what they do with their Principal's assets, because the Principal may demand an accounting at any time. This means that the Attorney-in-Fact must explain in detail what they have done with the Principal's property.

If a court is asked to look into the way an Attorney-in-Fact has handled the Principal's affairs, the court will order an accounting, and will expect the Attorney-In-Fact to explain why they took any action which does not seem to have been in the Principal's best interest. It will be up to the court to decide if the Attorney-in-Fact has acted in good faith, or has breached the duty to put the Principal's interests first. If the court finds that the Attorney-in-Fact has acted improperly, the court can order him or her to pay the Principal for any losses.

The person with Power of Attorney, or Attorney-in-Fact, is bound by the document which the Principal signed. If the wording of the document does not clearly state whether a certain act is allowed, a court may have to decide the issue. For example, if the Power of Attorney document does not clearly provide that the Attorney-in-Fact will be paid a fee for his or her services, or that the Attorney-In-Fact may make gifts to others, or that the Attorney-in-Fact can take investment risks with the Principal's money, a court may or may not find that these powers are given in the Power of Attorney document. Again, the test of the person holding Power of Attorney will be whether they actually performed their role with the utmost good faith.

There is a five-year statute of limitations for bringing an action under a Power of Attorney for violation of fiduciary duty. KRS 413.120(7); Ingram v. Cates, Ky.App., 74 S.W.3d 783 (2002).

For legal advice, call your local lawyer referral service or, if you are a low-income person, contact your local legal services program.

Persons over the age of 60 may obtain advice and consultation at 1-800-200-3633, the Legal HelpLine for Older Kentuckians.



Reviewed August 2009