The Financial Power of Attorney and Its Limitations

Georgia law permits persons to appoint agents, also known as attorneys-in-fact, to manage their financial affairs. A person appoints an attorney-in-fact to act in her place by signing a document called a power of attorney. The person who signs the power of attorney is known as the principal.

How a Power of Attorney Works

The power of attorney allows a person to plan for a future in which she might not be mentally or physically able to manage her personal finances or other legal affairs. A power of attorney can also be useful to a person who simply does not want the responsibility of managing her personal finances. Through the power of attorney, the principal can delegate financial responsibility to a family member, friend, or professional whom the principal trusts.

Typically, the principal can end the power of attorney at any time during the principal’s life. The attorney-in-fact’s authority to act under the power of attorney ends when the principal dies. Upon death, the probate court will appoint an executor (according to the will, if one exists) or administrator (if no will exists) to manage and distribute the property in the estate.

Fiduciary Duty

Generally, whatever one may do herself, may be done by an agent. However, no matter how much discretion the power of attorney gives the attorney-in-fact to manage the principal’s financial affairs, Georgia law does not permit the attorney-in-fact to do whatever she wants. The law provides protection to the principal in the event that the attorney-in-fact takes unfair advantage of her powers under the power of attorney to the detriment of the principal.

Under Georgia law, an attorney-in-fact who has broad authority to manage her principal’s financial affairs owes fiduciary duties to her principal. A fiduciary duty is the duty of utmost good faith and loyalty and to act in the best interest of the person to whom the fiduciary owes the duty. For example, an attorney-in-fact must act within the authority given to her by the principal, must exercise ordinary care, skill, and diligence, shall not sell to herself the principal’s property, and shall not make a personal profit from her principal’s property, unless the power of attorney actually authorizes such conduct.

Breach of Fiduciary Duty

Unfortunately, wrongdoing by an attorney-in-fact might not be discovered until after the principal’s death. In such a case, the executor or administrator of the estate could file a lawsuit on behalf of the estate against the attorney-in-fact. If the executor or administrator of the estate is the same person as the attorney-in-fact who committed wrong, then the beneficiaries or heirs could file a request in the probate court to remove the executor or administrator and appoint a new executor or administrator of the estate.

In short, be extremely careful to appoint a trustworthy and competent person as your attorney-in-fact. However, no matter what precautions you take, you may find yourself in a situation in which your attorney-in-fact has wrongfully managed your assets.

If you believe that your attorney-in-fact, or the attorney-in-fact of your family member or other loved one, is mismanaging finances or wrongfully taking assets, consult with a knowledgeable attorney as soon as possible. The attorneys of Schklar & Heim, LLC have the knowledge and experience necessary to recognize wrongdoing, gather and analyze complex financial data from various sources, work with forensic accountants and other experts, and advise and represent you in any ensuing litigation. You can reach us at 404-888-0100 or info@atlantalawfirm.net.