How financial agents are chosen and held accountable

Appointing a financial agent

In Minnesota, for example, the written power of attorney must be dated and signed. A signature made by another person on the principal’s behalf, or by a mark, must be acknowledged by a notary.

Minnesota’s statutory short form has additional requirements: exact wording and content, properly completed parts First, Second and Third, and acknowledgment of the principal’s signature.

Failure to name a successor, specify an expiration date or complete part Fourth does not invalidate that statutory form. These additional requirements concern Minnesota’s statutory short form, rather than every power of attorney. Other states differ.

Complete records and accounting in Minnesota

In Minnesota, for example, the agent must keep complete records of every transaction entered into on the principal’s behalf. Other states differ.

Under that Minnesota rule, an accounting is required only when:

• The principal requests it.
• The instrument requires accountings and specifies their recipient.
• The agent reimburses themselves for an expenditure made on the principal’s behalf.

A written statement giving reasonable notice of all transactions is an adequate accounting under that Minnesota rule.

In Minnesota, for example, the principal and the person designated in the document to receive required accountings may examine and copy the records. So may the estate’s guardian or conservator while the principal lives, and the personal representative after death. Other states differ.

The standard when an agent acts

In Minnesota, for example, an agent exercising authority must act as an ordinarily prudent person of discretion and intelligence would manage their own affairs, keeping the principal’s interests utmost in mind.

That Minnesota provision imposes no affirmative duty to exercise a granted power. Personal liability under it requires injury caused by bad faith or failure to account when an accounting is required. Other states differ.

Recordkeeping and disclosure in Delaware

In Delaware, an agent who accepts appointment must keep records of receipts, disbursements and transactions on the principal’s behalf, unless the personal power of attorney provides otherwise.

Subject to contrary provisions in the personal power of attorney and the guardian or fiduciary accountability rule below, disclosure requires a court order or an authorized request.

Delaware’s authorized requesters are:

• The principal.
• A guardian, conservator or another fiduciary acting for the principal.
• A government agency with authority to protect the principal’s welfare.
• After the principal’s death, the estate’s personal representative or successor in interest.

The agent must comply with such a request within a reasonable period. Family relationship alone is not a listed basis for requesting disclosure.

Delaware also makes an agent accountable to an appointed guardian or other fiduciary charged with managing the principal’s property or care, as well as to the principal, for powers the agent continues to hold.

Court review and accounting failures

In Minnesota, for example, the principal or a statutorily defined interested person may petition for a protective order directing an accounting on a court schedule, or for other specified protective relief. Other states differ.

Under that Minnesota rule, the principal or named accounting recipient may recover reasonable attorney fees and costs if the court finds the agent failed to provide an accounting after the duty arose.

Practical steps for handling money and records

The Consumer Financial Protection Bureau recommends keeping the principal’s money and property separate from your own and anyone else’s, retaining title in the principal’s name, and signing documents to identify your role as agent.

For an existing joint account, the bureau recommends getting legal advice before making any change.

Its recordkeeping guidance recommends:

• Record transaction amounts, dates, reasons and the people or companies involved.
• Keep receipts and notes, including for small expenses and cash transactions.
• If you advance personal funds, retain receipts and document why, what and when you reimbursed yourself.
• If compensation is permitted and paid, document the work, time, date and purpose.

These are practical recommendations, rather than a statutory monthly reporting schedule or permission to charge fees.

Two related terms

Durable power of attorney: In Minnesota, for example, a power expressing the required intent that authority remain exercisable despite later incapacity or incompetence is durable. Durability does not establish that authority begins immediately, and other states differ.

Duty of loyalty: In Missouri’s financial agent example, an agent who elects to act must serve the principal’s interest and avoid conflicts that impair that ability.

Common questions