Powers of attorney (POAs) are popular estate planning tools. POAs allow a person (“the principal”) to appoint a second person (the “attorney in fact”) to act for them in financial and/or health matters. As life-spans increase, many of us are unfortunately faced with the possibility of suffering from dementia or other ailments in our old age; major accidents can also be a source of temporary or permanent disability.
If an incapacitated person does not have POAs in place, it may be necessary to have the court appoint a guardian over them. Guardians must receive court approval for selling real estate, paying legal fees, and making certain major decisions for a protected person; they also must submit biennial accountings to the court. Guardianships can be expensive and involve public hearings.
Unfortunately, the chief benefit of appointing an attorney in fact – eliminating the need for court supervision – can also be its chief drawback. When no one is supervising an attorney in fact’s behavior, abuses can occur. Even if no harm is intended, the attorney in fact may be tempted to keep little to no records of his or her actions.
Without clear records, relatives or friends may suspect that the principal’s funds are being abused. For example, if one child is acting as a parent’s attorney in fact, his or her siblings may become suspicious that the parent’s assets are being wasted or misapplied.
If you are serving as an attorney in fact, it may seem difficult to know how much information you owe other interested parties, or how to resolve disputes with them over the way you have managed the protected person’s assets.
Illinois statutes determine how the legal system can be used to investigate the behavior of attorneys in fact. Here are some rules that any potential attorney in fact should keep in mind:
Accountings – A court does not automatically require accountings from an attorney in fact. However, Illinois dictates that any of the following persons may request an accounting from the attorney in fact: “the principal, a guardian appointed for the principal, or, upon the death of the principal, the personal representative of the principal’s estate, or an heir or legatee of the principal.” In other words, in many cases multiple persons can require that an attorney in fact produce an accounting of his or her actions on behalf of the principal.
Statute of Limitations – In general, once the attorney in fact has provided an interested party an accounting, there is a two-year limit for the interested party to sue the attorney in fact. However, “fraud, misrepresentation, or inadequate disclosure” may extend this limit indefinitely.
Court Involvement – If an attorney in fact wants closure on his or her work for the principal, he or she can petition the court to hold a hearing on his or her accounting and ask the court to review and approve the accounting.
It is helpful to keep in mind that, in most instances, a careful attorney in fact can avoid the costs and unwanted publicity of a guardianship as long as records are kept and accountings are produced upon request. Agents are normally given great discretion regarding spending, so keeping records should overcome any questions as to spending. Power of Attorney documents are often the most useful estate planning tools, however the authority that they provide does come with a large amount of responsibility.
It is a wonderful thing to be willing to serve as a parent, sibling, or friend’s attorney in fact – just keep in mind that once you begin making financial decisions for the principal, you must keep careful records. If you have questions about your duties as power of attorney, don’t hesitate to reach out to an experienced estate planning attorney at Thomas Mamer in Champaign, Illinois.
