An increased reliance upon Durable Power of Attorney appointments as analternative to a guardianship has placed more people in a position to assist others as attorneys-in-fact. Such relationships can be of tremendous benefit to the principal, can help to maintain the principal’s independence, and can help and ease the transitional changes in an elderly person’s lifestyle.
Our Law Tips faculty participant, Nathan S. J. Williams, Shambaugh, Kast, Beck & Williams, LLP, Fort Wayne, provides CLE training on Representing Attorneys-In-Fact during the popular 120 Hot Tips in Probate, Guardianships,Trusts and Tax seminar. I am appreciative that Nathan is passing along to our readers some of his timely guidance:
1. Pay Attention to Ethical Issues.
Specifically, identify who your client is. This is a fundamental issue, and the lines can become blurry in certain circumstances. For instance, assume that you represented a client with respect to his or her estate planning, and have prepared a Durable Power of Attorney for him or her. If the agent appointed in that document comes to you for counsel, are they your client or is the principal? It is not necessarily and not likely a conflict of interest to represent both the principal and agent. However, there are situations in which the issue may become relevant:
A. Attorney-client privilege. If a dispute develops between the agent and the principal- or, more likely, between the agent and the principal’s children or heirs – then it will be of benefit to the agent to be able to clearly identify that the attorney represents him or her.
B. Claim for the expense of defense. If an accounting is demanded of an attorney-in-fact, he or she has a claim under Indiana Code §30-5-6-4.5 to recover the cost of his or her legal counsel in defending the accounting. That claim is much easier to assert and process if the agent can clearly identify his or her attorney.
2. Document Everything
Record-keeping is one thing, and is addressed separately, below. This has more to do with documenting instructions and conversations than it does with documenting transactions. One of the primary duties of an attorney-in-fact is to carry out the wishes and instructions of the principal. Those instructions are often informal and verbal, rather than in writing. Proof of those instructions in the event of a later demanded accounting or an action seeking to hold the attorney-in-fact liable for breaches of fiduciary duty may be difficult if not impossible (by operation, among other things, of the dead-man’s statute).
As such, it can be imperative for an attorney-in-fact to verify instructions by having them reduced to writing by the principal or by having an independent witness to the instructions. Such actions may seem awkward, but may be lifesavers later on.
One element of documentation that is an absolute must: any arrangements between the principal and agent that allow/direct the agent to be compensated for his or her actions as attorney-in-fact. Undocumented statements that “Mom wanted me to be paid for the work which I did” are not worth the paper they are not written on.
3. Avoid Commingling
This is a practical recommendation, but any transaction done on behalf of the principal should be conducted as a separate transaction. If the agent wants to buy the principal some groceries or a dinner, that’s fine. If the agent wants to be reimbursed by the principal for anything purchased for him or her, then the agent should have a separate transaction, with a separate, dated receipt that shows what was purchased for the principal.
4. Keep Good Records
Some people are compulsive record keepers. Others are not. For the client who is a bit more relaxed on record-keeping, strong recommendation should be made to work hard at maintaining clear and accurate records. And organized records are much better than the proverbial shoe box (while the shoe box is better than nothing at all).
Some practical suggestions:
A. Conduct transactions on behalf of the principal by check. Cash transactions are too difficult to tie back together. Debit cards are also, and can provide too great a temptation.
B. Keep copies of bank statements. And the best bank statements are those which provide copies of the checks with them. If that is an additional charge for the account, it is likely well worth it.
5. Be an Open Book
Indiana Code §30-5-6-4 specifies who can request an accounting by the attorney-in-fact. An argument can be made that the only people who can request an accounting from the attorney-in-fact during the principal’s lifetime are the principal and a guardian appointed for the principal.
A recommendation: don’t make that argument. If a child of the principal, or some legitimately interested party makes a request for information about transactions done on behalf of the principal, there is not much to be gained by the attorney-in-fact to decline to provide that information. Accountability is a hallmark of fiduciary relationships. Reluctance or refusal to account only engenders distrust and fosters disputes.
A well-drafted Durable Power of Attorney document can and should include specifics on the duty of an attorney-in-fact to account, and the means by which the agent can satisfy that duty. In the absence of such specifics, and particularly in situations which seem to be ripe for dispute, an attorney should counsel an attorney-in-fact client to be affirmative and proactive in rendering regular, complete and accurate information on the administration of matters for the principal.
In summary, Nathan Williams offers this counsel: The attorney-in-fact acts as a fiduciary. As such, while the role is one that allows for the agent to provide great benefit to the principal, it is also fraught with liability. Good counsel, at the outset, throughout, and at the conclusion of the attorney-in-fact’s role can be critical to optimizing the relationship and providing the greatest good for the greatest number.
The opportunity to attend the 120 Hot Tips in Probate, Guardianships, Trusts and Tax is coming up in the next few months in several locations around Indiana. Click Here for more info.
About our Law Tips faculty participant:
Nathan S.J. Williams practices law in Fort Wayne, Indiana, at Shambaugh, Kast, Beck & Williams, LLP. His areas of practice include estate and personal planning, estate and trust administration, guardianships, probate litigation, charities, business organizations, general litigation, and taxation. He explains: “I came to work in these particular areas because I truly enjoy the role of attorney as a counselor, helping clients meet their goals and personal objectives. I often work with individuals or families where there is a special need or disability, putting to use my education and expenence.”
About our Law Tips blogger:
Nancy Hurley has long-standing connections with Indiana lawyers. She was formerly a member of the ISBA and IBF staffs for over 30 years. Nancy’s latest lifestyle venture is with ICLEF. We are utilizing her exceptional writing and interviewing skills while exploring how her Indiana-lawyer background fits with ICLEF’s needs. When she isn’t ferreting out new topics for Law Tips, her work can be found in our Speaker Spotlight blogs, postings on the ICLEF Facebook and Twitter pages, and other places her legal experience lends itself.
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