Many of us will agree to be an Attorney (the person who has been named in a Power of Attorney (“POA”) document) for a parent, relative or friend, or have already done so. However, we do so sometimes without really knowing what we are legally required to do once the time comes for us to act. One area that consistently causes problems is that of keeping proper financial records. As a consequence, when legitimate questions are asked, satisfactory answers cannot be easily given. This in turn diminishes the confidence of the Grantor (the person who has made the POA) and other concerned people. This can create stress not only for you, but also for the Grantor as well as those who are genuinely concerned about the Grantor. All too often, sloppy or non-existent records leads to litigation. As the person in whom the Grantor has placed their trust, you can ensure peace of mind for all by understanding, at a minimum, the following with respect to your record keeping obligations as an Attorney.
It is important for you to understand that you have a fiduciary duty to the Grantor. This means you agree to act honestly, loyally and with integrity, strictly in the best interests of the Grantor at all times. Secondly, as a practical matter this means that you as Attorney must keep records of all transactions done on the Grantor’s behalf. Apart from the fact that an Attorney is legallyrequired to keep records, there are other compelling reasons to do so:
- To ensure that timely and accurate financial information is always available– If the Grantor becomes incapacitated and personal-care decisions have to be made quickly, knowing the state of the Grantor’s financial position will be essential both in making decisions in the present, but also planning for the future;
- To create an accurate evidentiary record- If events become acrimonious with other potential interested parties, providing an evidentiary record of your management will be required and may reduce the possibility of litigation;
- To preserve the Estate- Safeguard the assets and liabilities that you are managing;
- To safeguard your own reputation- You want to avoid accusations of malfeasance or mismanagement that might result in a tainting of your professional and/or personal reputation. Also, deficient record keeping may result in the Attorney being held personally responsible for debts as well as losses of the person whose affairs are being managed; and
- To save Time and Money- If a formalized set of accounts are required to be presented to the Court, both legal and accounting fees will be significantly reduced if well-maintained financial records are available.
Knowing that one must keep records as part of the job of an Attorney is all well and good, but what does it mean to “keep records”? How much time is it going to take?
The answer will depend upon the type of circumstances you find yourself in. Unfortunately, there is no “one size fits all” approach. Nevertheless, the following are some general guidelines which will assist you in developing sound record keeping habits:
- Keep a simple diary of all transactions that you are involved with, identifying date, nature of transaction, amount, the source or payee of the amount and reason for your actions. This diary can be supplemented with written instructions from the Grantor should the nature of the transaction warrant a more formalized notation, e.g., large cash transaction or payment;
- Keep a note of all regular/pre-authorized activities, such as utility payments. This will help in highlighting any unusual or unexpected withdrawal activity that may occur and prompt a timely question;
- Review the bank and investment statements every month, making a notation on the statement against activity as to what it is. Make sure you have receipts/invoices to support all withdrawals; and
- Monthly, review with the Grantor, bank statements to ensure accuracy of the activity. Monthly is suggested because banks usually require discrepancies to be reported within 30 days. These review sessions need not be long or involved but will ensure that you and the Grantor are both fully aware of the Grantor’s current financial circumstances.
Finally, starting out on the right foot will help ensure that you develop the habits necessary to properly keep records with minimal time and effort. Diligence in developing sound record keeping habits will provide you and the Grantor, as well as friends and family, with confidence that the Grantor’s affairs are being well-managed.