An individual who has been given authority via a power of attorney, also known as an "agent," may sometimes change beneficiaries on bank accounts. Although state law varies, this type of authority may only be granted in specific circumstances. When an agent wields authority she does not actually have --such as changing beneficiaries -- it may be considered an abuse of her power.
General or Limited Powers
The creator of a power of attorney for finances -- known as a "principal" -- gives an agent the authority to conduct certain financial transactions on the principal's behalf. The powers granted via a power of attorney may be limited or general. In this sense, a power of attorney document is quite flexible, and a principal may choose to give an agent broad authority to "step into his shoes." This means the agent may conduct -- on the principal's behalf -- the same types of financial transactions as the principal. For example, if a power of attorney document is general, the agent may have the authority to buy and sell real estate and stock and make withdrawals from bank accounts. Conversely, a principal may create a power of attorney that is limited such that the agent may only pay specific bills or make deposits.
Changing Beneficiary Designations
Some power of attorney documents may be drawn so broadly as to give an agent the power to change beneficiaries on life insurance policies, bank accounts and retirement policies. However, the agent has a fiduciary duty to act in good faith. In other words, the agent is required to use her power to the principal's benefit. Moreover, if an agent changes beneficiary designations to benefit herself in some way, the original beneficiaries may be able to sue her for fraud or breach of fiduciary duty.
Varying State Law
Because power of attorney documents have become more popular, some states are imposing requirements regarding express language. For example, Colorado requires a power of attorney document to expressly state that the agent may change beneficiary designations; if this language is not included, the agent does not have authority to do so. Moreover, if an interested person believes an agent is abusing her power, he may file a complaint with a court.
Automatic Beneficiary Designations
Some states, such as Florida, prohibit agents from changing beneficiary designations on accounts that automatically pass to named beneficiaries -- such as joint accounts and payable-on-death accounts -- unless the power of attorney document expressly grants this power. Depending on the state, an agent may be liable for damages if she changes automatic beneficiary designations.