A SUMMARY OF POWER OF ATTORNEY LAW AND DUTIES IN VIRGINIA
What duties does an “attorney-in-fact” have acting under a power of attorney in Virginia?
UNIFORM POWER OF ATTORNEY ACT
Virginia has adopted the Uniform Power of Attorney Act, Va Code § 65.2-1600 et seq.
“Power of attorney” means a writing or other record that grants authority to an agent to act in the place of the principal, whether or not the term power of attorney is used. “Principal” means an individual who grants authority to an agent in a power of attorney. “Agent” means a person granted authority to act for a principal under a power of attorney, whether denominated an agent, attorney-in-fact, or otherwise. The term includes an original agent, co-agent, successor agent, and a person to which an agent’s authority is delegated. By statute, the power of attorney is “durable” unless it expressly provides that it is terminated by the incapacity of the principal. 64.2-1602.
Once a principal becomes incapacitated, a durable power of attorney terminates only upon the death of the principal or upon the order of a court. (The attorney-in-fact has no authority to act after the death of the principal).
Where a principal designates two or more persons to act as co-agents, unless the power of attorney provides otherwise, each co-agent may exercise its authority independently. An agent that has actual knowledge of a breach or imminent breach of fiduciary duty by another agent shall notify the principal and, if the principal is incapacitated, take any action reasonably appropriate in the circumstances to safeguard the principal’s best interest. An agent that fails to notify the principal or take action as required by this subsection is liable for the reasonably foreseeable damages that could have been avoided if the agent had notified the principal or taken such action. Va. Code Ann. § 64.2-1609
Unless the power of attorney otherwise provides, an agent is entitled to reimbursement of expenses reasonably incurred on behalf of the principal and to compensation that is reasonable under the circumstances.
DUTIES OF ATTORNEY-IN-FACT/AGENT UNDER POWER OF ATTORNEY
Virginia Va. Code Ann. § 64.2-1612 describes the duties of the agent. Generally, there are several absolute rules regarding the agent’s duties. These are that the attorney-in-fact/agent must (1) Act in accordance with the principal’s reasonable expectations to the extent actually known by the agent and, otherwise, in the principal’s best interest; (2). Act in good faith; and (3) Act only within the scope of authority granted in the power of attorney. Va. Code Ann. § 64.2-1612.
Except as otherwise provided in the power of attorney, an agent that has accepted appointment shall:
- 1. Act loyally for the principal’s benefit;
- 2. Act so as not to create a conflict of interest that impairs the agent’s ability to act impartially in the principal’s best interest;
- 3. Act with the care, competence, and diligence ordinarily exercised by agents in similar circumstances;
- 4. Keep a record of all receipts, disbursements, and transactions made on behalf of the principal;
- 5. Cooperate with a person that has authority to make health care decisions for the principal to carry out the principal’s reasonable expectations to the extent actually known by the agent and otherwise act in the principal’s best interest; and
- 6. Attempt to preserve the principal’s estate plan, to the extent actually known by the agent, if preserving the plan is consistent with the principal’s best interest based on all relevant factors, including:
- a. The value and nature of the principal’s property;
- b. The principal’s foreseeable obligations and need for maintenance;
- c. Minimization of taxes, including income, estate, inheritance, generation-skipping transfer, and gift taxes; and
- d. Eligibility for a benefit, a program, or assistance under a statute or regulation.
DUTY TO GIVE AN ACCOUNTING
Va. Code Ann. § 64.2-1612 requires that the agent provide an accounting upon request as specified: Except as otherwise provided in the power of attorney, an agent shall disclose receipts, disbursements, or transactions conducted on behalf of the principal if requested by the principal, a guardian, a conservator, another fiduciary acting for the principal, or, upon the death of the principal, by the personal representative or successor in interest of the principal’s estate. If so requested, within 30 days the agent shall comply with the request or provide a writing or other record substantiating why additional time is needed and shall comply with the request within an additional 30 days.
In Virginia an interested party can compel an accounting of a fiduciary by suit in equity. Virginia Code § 8.01-31. An attorney-in-fact is a fiduciary. An agent, i.e., a fiduciary, has a duty to account for his receipts, payments, and disbursements and for all other transactions conducted on behalf of his principal. 1A M.J., Agency, § 67.Williams v. Orr, 41 Va. Cir. 182, 183 (Cir. Ct. 1996)
Va. Code § 8.01-31.state as follows: Accounting in equity.
An accounting in equity may be had against any fiduciary or by one joint tenant, tenant in common, or coparcener for receiving more than comes to his just share or proportion, or against the personal representative of any such party.
JUDICIAL REVIEW AND RELIEF
Va. Code § 64.2-1614 provides that judicial relief is available to construe a power of attorney or review the agent’s conduct and to grant appropriate relief. Such relief may be sought by petition from numerous individuals, including the principal or the agent, the principal’s spouse, parent or descendant, sibling of the principal, nieces and nephews of the principal, named beneficiaries and even the principal’s care giver to name a few.
POWER OF ATTORNEY IS STRICTLY CONSTRUED
In Virginia, powers of attorney have been strictly construed for over a century. The authority granted by such an instrument is never considered to be greater than that warranted by its language, or indispensable to the effective operation of the authority granted. The authority given is not extended beyond the terms in which it is expressed. Hotchkiss v. Middlekauf, 96 Va. 649, 653, 32 S.E. 36, 37-38 (1899)Jones v. Brandt, 274 Va. 131, 137, 645 S.E.2d 312, 315 (2007)
This general rule of construction essentially provides that expansive language contained in the power of attorney should be interpreted as intending only to confer those incidental powers necessary to accomplish objects as to which express authority has been given to the attorney-in-fact. Id. The policy that supports this rule of construction is that the power to dispose of the principal’s property is so susceptible of abuse that the power should not be implied. That abuse of the agent’s power is particularly dangerous in a case involving a durable power of attorney, which by its nature remains in effect after the principal has become incapable of monitoring the agent’s conduct. We do not retreat from the rationale of these guidelines of construction. Jones v. Brandt, 274 Va. 131, 137, 645 S.E.2d 312, 315 (2007)
Because of this rule of construction, many power of attorneys include standard provisions granting broad general power to the agent which are intended by the principal to become applicable so as to avoid any potential unintended limitation in the authority expressly granted. Jones v. Brandt, 274 Va. 131, 138, 645 S.E.2d 312, 315 (2007)
SELF-DEALING AND CONFLICTS OF INTEREST
A fiduciary may not take a position inconsistent with the interests of the principal. Statham v. Ferguson, 66 Va. 298 (25 Gratt.) 28 (1874); Ferguson v. Gooch, 94 Va. 1, 26 S.E. 397 (1896); Parsons v. Wysor, 180 Va. 84, 21 S.E.2d 753 (1942); Byars v. Stone, 186 Va. 518, 42 S.E.2d 847 (1947).Creasy v. Henderson, 210 Va. 744, 749, 173 S.E.2d 823, 828 (1970)
Thus, whenever a fiduciary relationship exists between parties, the existence of one or more transactions which benefit the party who owes a fiduciary duty to the other shifts the burden of proving the bona fides of the transaction to the party owing the duty. Ayers v. Shaffer, 286 Va. 212, 225-26, 748 S.E.2d 83, 91 (2013). Where a fiduciary participates in a transaction by which the fiduciary acquires the principal’s property or benefits financially, these acts are presumptively fraudulent and the burden is on the fiduciary to overcome the presumption of constructive fraud by clear and satisfactory evidence, more than a mere preponderance of the evidence. Nicholson v. Shockey, 192 Va. 270, 64 S.E.2d 813 (1951); Owens v. Owens, 196 Va. 966, 972, 86 S.E.2d 181, 185 (1955).Creasy v. Henderson, 210 Va. 744, 750, 173 S.E.2d 823, 828 (1970).
Virginia law considers persons appointed as attorneys-in-fact under general powers of appointment to be fiduciaries who owe fiduciary duties to their principals. See e.g., Oden v. Salch, 237 Va. 525, 379 S.E.2d 346 (1989) (affirming damage award for estate against decedent’s attorney-in-fact for fraudulent conversion of decedent’s assets and holding as proper an instruction that attorney-in-fact owed fiduciary duties to principal); Creasy v. Henderson, 210 Va. 744, 173 S.E.2d 823 (1970) (attorney-in-fact owes fiduciary duties to principal). As part of the fiduciary relationship between an attorney-in-fact and her principal, the attorney-in-fact has a duty to account to her principal for all property and funds belonging to her principal which the attorney-in-fact has acquired by virtue of the appointment. See e.g., Bain v. Pulley, 201 Va. 398, 111 S.E.2d 287 (1959) (quoting Restatement of Agency, “unless otherwise agreed, an agent is subject to a duty to keep, and render to his principal, an account of money or other things which he has received or paid out on behalf of the principal.”) This duty to account encompasses the proceeds of all sales made on behalf of the principal. Upon the death of the principal, the attorney-in-fact has a duty to account to the principal’s administrator. See Oden, supra.Koury v. Rossie, 33 Va. Cir. 460, 461-62 (Cir. Ct. 1994).
SPECIFIC GRANT REQUIRED FOR CERTAIN ACTIONS
Va Code § 64.2-1622 requires an express grant of authority in the power of attorney to do certain actions, including:
- 1. Create, amend, revoke, or terminate an inter vivos trust;
- 2. Make a gift;
- 3. Create or change rights of survivorship;
- 4. Create or change a beneficiary designation;
- 5. Delegate authority granted under the power of attorney;
- 6. Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan; or
- 7. Exercise fiduciary powers that the principal has authority to delegate.
Thomas H. Roberts & Associates, P.C.
105 South 1st Street
Richmond, VA 23219
The materials are prepared for information purposes only. The materials are not legal advice and you should not act upon the information without seeking the advice of an attorney. Nothing herein creates an attorney-client relationship.