In Florida, a commonly used estate planning instrument is known as a “Durable Power of Attorney” (“DPOA”). This instrument is executed by a person whereby he or she appoints an agent to act on their behalf on personal, business, and financial matters. The DPOA is particularly helpful for elderly or disabled persons because it allows them to appoint someone who can take care of matters such as banking, dealing with insurance companies, etc. In essence, the DPOA places the agent into the shoes of the person who executes the DPOA—known as the principal. The agent can then do most things that the principal can do.
A person appointed as agent under a DPOA acts as a fiduciary when acting on behalf of the principal. The fiduciary must act in the best interests of the principal. Unfortunately, as with many well-intended matters, sometimes the agent appointed under the DPOA misuses his or her power, thereby breaching that fiduciary duty. In our estate planning practice, it is not uncommon to see family members who are concerned that someone appointed as agent under a DPOA is taking advantage of an elderly family member.
What types of actions by an agent under a DPOA would constitute breach of that fiduciary duty? In Florida, as it relates to an elderly person or disabled adult, Section 825.103(1)(c), Fla. Stat. brings that into focus. That section provides that a breach of a fiduciary duty to an elderly person (who is age 60 or older) or a disabled adult by an agent under a DPOA occurs when the agent uses the DPOA in making an unauthorized appropriation, sale, or transfer of property. An unauthorized appropriation under occurs when the elderly person or disabled adult does not receive the reasonably equivalent financial value in goods or services, or when the fiduciary violates any of these duties:
a. Committing fraud in obtaining their appointments;
b. Abusing their powers;
c. Wasting, embezzling, or intentionally mismanaging the assets of the principal….; or
d. Acting contrary to the principal’s sole benefit or best interest.
One of the most blatant examples of this type of exploitation occurs when an agent uses the power of the DPOA to transfer money or other assets into the agent’s name. The act itself isn’t a breach of fiduciary duty if the money or assets are used for the principal’s needs. However, if those funds or assets are used for the agent, or any one other than the principal, then the breach can occur.
We occasionally have agents ask what they can and cannot do in using the DPOA. Often the best ways to answer that is to ask some questions: Is what you are contemplating doing in the best interests of the principal? Is it done to meet the principal’s needs? Is someone other than the principal benefitting from what you’re contemplating doing?
Some persons appointed as agent under a DPOA express concern that they could be held liable for breaching a fiduciary duty. They may even decline acting as agent out of this concern. Section 825.105, Fla. Stat., entitled “Good faith assistance” provides that:
This chapter is not intended to impose criminal liability on a person who makes a good faith effort to assist an elderly person or disabled adult in the management of the funds, assets, or property of the elderly person or disabled adult, which effort fails through no fault of the person.
In essence, this section protects the agent so long as the agent is acting for the principal in good faith. So if an agent takes action believing in good faith that it is in the best interests of the principal, the mere fact that a failed outcome occurs does not mean that the agent has breached his or her fiduciary duty. Here’s an example: Agent believes that an investment owned by the principal is risky and decides it should be sold so as to lessen the principal’s risk of loss. The agent is concerned about preserving assets for the principal’s needs. Based on these concerns, the investment is sold and the following week, its value has actually increased by ten percent. Since the agent acted in good faith believing that the sale was in the principal’s best interests, the action would not be a breach of duty.