It is very typical for a parent or spouse to grant another individual, which is usually a family member, a power of attorney to assist them should there arise a time when they become either mentally incapacitated or physically unable to attend to necessary tasks in their lives. Although powers of attorney can be extraordinarily helpful to the person who needs the assistance, it should also be understood that if you undertake this duty to act pursuant to a power of attorney that certain statutory obligations are attached. One mandatory obligation that is imposed upon a person who may serve as a power of attorney is the duty to maintain accurate books and records of all financial transactions. The applicable New Jersey statute, which is set forth below, was enacted for the purpose of requiring a fiduciary to account in order to protect a principal from abuses of a power of attorney by an agent. This statutory requirement is not substantial, overburdensome, nor is it optional.
Pursuant to N.J.S.A. 46:2B-8.13
An attorney-in-fact has a fiduciary duty to the principal, and to the guardian of the property of the principal if the principal has been adjudicated an incapacitated person, to act within the powers delegated by the power of attorney and solely for the benefit of the principal.
The attorney-in-fact shall maintain accurate books and records of all financial transactions. The principal, a guardian or conservator appointed for the principal, and the personal representative of the principal’s estate may require the attorney-in-fact to render an accounting. The Superior Court may, upon application of any heir or other next friend of the principal, require the attorney-in-fact to render an accounting if satisfied that the principal is incapacitated and there is doubt or concern whether the attorney-in-fact is acting within the powers delegated by the power-of-attorney, or is acting solely for the benefit of the principal.
The statute is clear that the duty to account is not optional, but instead, is mandatory and there are no exceptions to this duty. As such, it is crucial that an agent under of a power of attorney maintain accurate books and records of all financial transactions they undertake when utilizing a power of attorney that is granted to them while assisting the person in need. Should an agent acting pursuant to a power of attorney fail to maintain such records they could ultimately be found liable to the principal of the power of attorney and/or the estate of this individual if they are unable to properly account. The demand for an accounting can be required by the principal who granted the power of attorney, a guardian or conservator appointed for the principal, and the personal representative of the principal’s estate. Once this request is made the burden now shifts for the agent under the power of attorney to fully and completely account.
For these reasons, it is strongly suggested that if you are either considering granting a power of attorney, or serving as an agent pursuant to one, that you consult with counsel as to your legal rights and obligations. With proper advice and a simple plan of action the process will not be burdensome. On the other hand, however, failure to abide by the statutory imposed obligations could have disastrous consequences.