An elderly mother in Brooklyn has a stroke and can no longer manage her finances. Her son finds the Power of Attorney she signed years ago, naming him as her agent. He starts paying her nursing home bills and taxes from her accounts. But then he uses her debit card to pay off his own $5,000 credit card bill. He thinks, “Mom always helped me out. She’d want me to have this.”
Well-intentioned or not, he has breached his legal duty. In the eyes of the law, his action is a betrayal of trust.
In my practice, I often see families confuse the document—the Power of Attorney—with the legal standard that governs it. They are not the same. One is a tool; the other is a duty. Understanding this distinction is fundamental to protecting your assets if you become incapacitated.
“Fiduciary” Is a Standard, Not a Job Title
People ask me to compare a “fiduciary” and a “power of attorney” as if they are two different roles. This is a common misunderstanding. A fiduciary is not a person; it is a legal standard of conduct. It is the highest standard of care in New York law, imposing a duty of undivided loyalty.
A fiduciary must act solely in the best interest of the person they serve—the principal. You cannot put your own interests first. You cannot commingle their assets with yours. You cannot engage in self-dealing, as the son in our example did. The responsibility is one of profound stewardship.
Several roles in estate planning carry this duty. The trustee of a trust is a fiduciary. The executor of a will is a fiduciary. And, critically, the agent you name in your Power of Attorney is a fiduciary. The moment they act on your behalf, they are bound by this stringent legal and ethical code.
The Power of Attorney: Granting Authority, Imposing Duty
A Power of Attorney (POA) is a document where you, the “principal,” grant authority to an “agent” to make financial decisions on your behalf. It is the instrument that protects your financial life when you cannot manage it yourself.
This grant of power is not a blank check. The agent’s authority is governed by a strict set of rules. Here in New York, New York General Obligations Law § 5-1505 outlines the fiduciary duties an agent owes to the principal. These duties include:
- Acting according to your instructions or, where there are none, in your best interest.
- Keeping their funds and property separate from yours.
- Keeping a careful record of all receipts, disbursements, and transactions.
- Acting with care, competence, and diligence.
The agent cannot simply do what they think you “would have wanted.” They must do what is demonstrably in your best interest, free from any conflict of interest. That $5,000 credit card payment primarily benefited the son, not his mother. It was a breach of his fiduciary duty, regardless of his intent.
When Trust Is Broken: The Consequences of a Breach
What happens when an agent breaches their fiduciary duty? The consequences are severe. If another family member discovers the misconduct, they can initiate a legal proceeding to hold the agent accountable.
A judge in Surrogate’s Court can force the agent to provide a full accounting of every transaction. If a breach is found, the court can revoke the Power of Attorney, remove the agent, and order the agent to repay any misappropriated funds, plus interest. The agent can be held personally liable for financial damages their actions caused.
Selecting your agent is one of the most critical decisions you will make. It is not a popularity contest or a way to honor a particular child. The decision must be based on unwavering trust, proven judgment, and a clear understanding of the immense responsibility the role entails. Your agent is more than a helper—they are your legal custodian in a time of vulnerability.
Before you sign a Power of Attorney, have a frank conversation with your chosen agent about what the role demands. They must understand they are not just managing money; they are accepting a solemn legal obligation to protect your legacy. Stewardship.
If you have an older Power of Attorney or are considering whom to appoint, the most prudent next step is a formal review. A review clarifies the powers granted in the document and confirms your chosen agent understands the profound fiduciary duties they will be undertaking.
