Can a Person With Power of Attorney for Another Profit From the Sale of a House?

By Heather Frances J.D.

A power of attorney is created when a person -- the principal -- creates a document giving authority to a third party – the agent – to accomplish tasks on his behalf. The agent’s authority can be very broad or narrowed to just one area. When an agent has authority to sell the principal’s home, he must act in the principal’s best interests.

Fiduciary Duty

A power of attorney document creates a fiduciary relationship between the agent and the principal. This means that the agent is bound to act according to certain duties, including loyalty, fidelity, full disclosure and integrity. The agent must be loyal to the principal and deal honestly within the boundaries of the power of attorney relationship. The agent cannot engage in self-dealing practices, especially if those acts would not be in the principal’s best interests. For example, an agent should not sell the principal’s house to himself for less than its market value.

Commingling Assets

To avoid even the appearance of self-dealing, an agent must be careful to keep money from his personal business separate from his dealings for the principal, including proceeds from the sale of the principal's home. If the agent mixes the principal’s funds with his own, the funds could become so mixed – or commingled – that it becomes difficult to determine which funds belong to the agent and which to the principal.

Ready to appoint a power of attorney? Get Started Now

Expenses

Generally, agents are entitled to reimbursement for reasonable out-of-pocket expenses incurred on behalf of the principal. Broker fees or cleaning expenses could be considered reasonable, reimbursable expenses when an agent sells a house for the principal. Reimbursement is not the same as profiting from the sale of property. Depending on the language contained in the power of attorney document, the principal may require the agent to keep receipts and records for reimbursement.

Abuse of Authority

Interested parties, such as family members or friends of the principal, may report abuse of a power of attorney to the principal or to appropriate authorities. The agent may be removed with sufficient evidence of self-dealing or a breach of the fiduciary duties. Depending on the exact circumstances of the abuse of power, the agent could even be guilty of crimes like fraud, theft or forgery.

Ready to appoint a power of attorney? Get Started Now
Do-It-Yourself Power of Attorney

References

Related articles

Can a Person with My Power of Attorney Get Sued if a Credit Card Company Sues Me?

With a power of attorney, the document's creator, called a principal, gives authority to someone else, called his agent, to act on his behalf. The agent may have broad permission to access the principal's finances and even make charges on his credit card. However, agents are not typically personally liable for a principal's credit card debt.

Differences Between a Power of Attorney & a Letter of Authorization

Actors and baseball players aren't the only people who need agents. Life is complicated so we often must appoint surrogates to help carry out our wishes, handle our money or make life-and-death decisions about our health care. You can use both the power of attorney and the letter of authorization to designate agents, their duties and their limitations. Be aware, however, of the important differences between the two kinds of documents.

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 transactions on your behalf. Since your agent has so much authority, it may be easy for him to abuse the power of attorney to act in his own best interests rather than yours. However, state laws can provide protection against abuses, and you can incorporate safeguards into your power of attorney to help deter abuse.

Related articles

Does Having a Power of Attorney Require Reporting How Money Is Spent

A power of attorney is a written authorization by which a person, or principal, authorizes another person, the agent, ...

Can You Sell a Home With a Power of Attorney?

Depending on state laws, powers of attorney can give an agent broad powers over someone’s finances and property. With a ...

How to Determine a Misuse of Power of Attorney

There is a significant danger to an agent misusing his power of attorney because it may be hard to observe. The power ...

Assuming a Mortgage With Power of Attorney

While state laws regarding powers of attorney vary, a power of attorney can allow one person to conduct financial ...

Browse by category
Ready to Begin? GET STARTED