Working With Fiduciaries

Understanding The Responsibility of the Power of Attorney (POA) and Fiduciary: We learned recently why it is so important to clearly understand the requirements if you are designated as a POA. For example your loved one has Alzheimer’s and you’re the POA and your loved one tells a medical worker that the POA took $500 from him. Even if it is not a true statement; it could be simply that your loved one has forgotten what they did with the $500, the medical worker is REQUIRED to report the suspicion to the proper authorities and Protective Services begins an investigation. Are you (the POA) prepared with accurate financial records to prove that you didn’t take those funds? We estimate that more than 50% of our clients are already acting as a ‘Fiduciary’ or at any time may end up as a POA or Trustee.

With that in mind I requested that Wes Fitzwater, an estate attorney at Fitzwater, Meyer, Hollis & Marmion LLP write an explanation of Fiduciaries’ responsibilities. I have worked with his firm for more than 25 years and find them great to work with, especially in anything to do with ‘Elder Care’.

“WORKING WITH FIDUCIARIES”

By Wesley D Fitzwater
Fitzwater Meyer Hollis & Marmion LLP
Attorneys at Law

The “aging” of our society and the large shift of wealth that will occur in the next 30 years is increasing both the number of fiduciaries acting on behalf of incapacitated persons and the temptation to breach those duties when large sums of money are involved. Litigation against fiduciaries, including agents under Power of Attorney, Trustees of Revocable or Irrevocable Trusts and even court appointed Conservators is on the rise.

A. The Fiduciaries

1. Agent under Powers of Attorney
A Power of Attorney is a written instrument in which one person (as “principal”) appoints another to serve as his or her agent or “attorney-in-fact.” A Power of Attorney confers upon the agent the authority to act in place of the principal for the purposes stated in the instrument.
The fiduciary duties of an agent under Power of Attorney are generally governed by the document and Oregon law.

2. Trustee of Revocable Living Trust
The Revocable Living Trust is an excellent way to provide for decision-making if the principal/settlor becomes incapacitated. The Trust appoints a decision-maker (“successor Trustee”) upon the incapacity of the principal. The Trust document can incorporate specific instructions about how funds will be used if the principal becomes incapacitated. The fiduciary duties of a Trustee of a Trust are governed by the document and Oregon law.

3. Court-Appointed Conservator
A Conservator may be appointed by the court if it is determined that the individual lacks the capacity to manage his/her financial resources. The Conservator can be an individual, bank, trust company or professional fiduciary. The Conservator is empowered to take possession of the protected person’s assets and income, and provides for payment of the person’s expenses. The Conservator has all the powers that the person would individually possess to manage financial affairs, with or without prior court approval. The fiduciary duties of a Conservator are governed by Oregon law.

B. The Duties and Liabilities of a Fiduciary

Any person acting as a fiduciary is bound by the duty and liability to act in the best interests of the principal. Whether an agent, a trustee or a Conservator, the fiduciary is bound by similar legal obligations. Breach of one or more of these legal duties exposes the fiduciary to legal action and potential personal liability for harm done to the principal.

A fiduciary must:

  1. Preserve and protect the assets of the principal and entity.
  2. Keep scrupulous records of all income and expenses. Be prepared to provide a full accounting as required by law.
  3. Keep funds “titled” in the name of the principal or entity. Keep all funds entirely separate from the fiduciary’s own personal funds.
  4. Use the property for the benefit of the principal, beneficiary or protected person only.
  5. No gifts, loans or transfers to a third-party without specific written authority in the document or by the court.
  6. Preserve and protect the “Estate Plan” of the principal, settlor or protected person. Upon incapacity, the principal’s estate plan becomes irrevocable. The fiduciary may not change beneficiary designations, eliminate rights of survivorship, or take other actions to change or undo the provisions of the principal’s Last Will and Testament.

For more information about Powers of Attorney or Revocable Living Trusts and/or the duties of fiduciaries, visit the firm’s website at www.fitzwatermeyer.com or contact Wes Fitzwater at 503-786-8191 or wfitzwater(at)fitzwatermeyer(dot)com.

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