Is a Power of Attorney Liable for Debts?

By Chris Blank

When you assign a power of attorney, you, as the principal, authorize another person to serve as your agent to make financial transactions on your behalf. Under normal circumstances, establishing a power of attorney does not create personal liability for the agent, but consult with an attorney who specializes in matters related to powers of attorney with questions about your particular circumstances.

When you assign a power of attorney, you, as the principal, authorize another person to serve as your agent to make financial transactions on your behalf. Under normal circumstances, establishing a power of attorney does not create personal liability for the agent, but consult with an attorney who specializes in matters related to powers of attorney with questions about your particular circumstances.

Power of Attorney

As long as your general power of attorney remains in force, your agent has the authority to access your bank accounts, pay bills and handle other financial obligations on your behalf. She may also hold the authority to make decisions regarding your medical care. But it is important to understand that assigning a power of attorney does not mean that you give up the right to handle your own affairs -- in fact, the agent must act according to your stated wishes as long as you remain mentally competent.

Ready to appoint a power of attorney? Get Started Now

Cosigner

Unlike an agent who holds a power of attorney, a cosigner assumes some level of financial liability. Depending on the nature of the agreement, a cosigner may be equally liable with another for the financial obligation involved or responsible for payment only if the actual purchaser defaults on the contract. In the former case, a creditor can pursue the cosigner for payment when due; in the latter case the creditor must attempt to collect payment from the principal before attempting to extract payment from the cosigner.

Fiduciary Duty Versus Financial Liability

Assigning duties to an agent under a power of attorney creates what the law refers to as a "fiduciary duty." That is, your agent must execute her duties in your best interests rather than in her own. While serving pursuant to a power of attorney, the agent should not use her personal resources to conduct financial transactions on your behalf, therefore she does not become financially liable for transactions made on your behalf unless she also agrees to serve as a cosigner for those transactions.

Abuse of Power of Attorney

The term "liability" means facing possible legal consequences for personal conduct. Individuals who have acted improperly may be sued in civil court or even tried in criminal court, depending on the nature of the conduct involved. If your agent acts improperly in executing the duties set out under the power of attorney, she may face jail time, in addition to financial liability and other civil consequences. An obvious example of abuse of the power of attorney is when an agent diverts the assets of the principal for her own benefit.

Ready to appoint a power of attorney? Get Started Now
Guardianship Vs. Durable Power of Attorney

References

Resources

Related articles

Power of Attorney Obligations

A person who creates a power of attorney, known as the principal, typically appoints someone she fully and completely trusts to act as her agent, or attorney-in-fact. The authority granted under a power of attorney often allows the agent to perform actions that, absent a power of attorney, only the principal herself can perform. Therefore, the agent has a fiduciary responsibility to act for the benefit of and in the best interest of the principal.

Can a Power of Attorney Take Money?

When you give someone a power of attorney to accomplish tasks on your behalf, you make that person your agent, and his actions have the same legal authority as if you had taken those same actions. For example, if you give your agent authority to access your bank accounts, he can take money from the account. However, your agent has a legal duty to act in your best interests, so he can’t use the money for his own benefit.

What to Do if a Power of Attorney Is Abusing an Elderly Person's Checking Account

For elderly individuals, a financial power of attorney (POA) can be an important tool for managing property and making sure that bills are paid. Financial POA's allow a person, referred to as the principal, to delegate financial decision-making authority to another, known as the agent. Because the agent often has access to bank accounts, the potential for abuse of the principal's funds can be an issue. However, certain remedies are available to individuals affected by the wrongful acts of an agent.

Related articles

How to Use a Power Of Attorney

A power of attorney is a document that gives another person the authority to conduct personal or business transactions ...

Risks of a Financial Power of Attorney

Giving someone power of attorney over your financial affairs can be frightening, especially if the reason you need the ...

What Is Financial Power of Attorney Abuse?

When you, as a principal, create a power of attorney, you give your agent a significant amount of authority to conduct ...

Power of Attorney Responsibilities

A power of attorney gives you (the agent) the legal right to act on behalf of someone else (the principal). The power ...

Browse by category