Power of Attorney 101: Duties, Risks, and Best Practices Every Agent Should Know

Guidance from a Birmingham, Alabama estate planning attorney.

When someone names you as their agent (attorney‑in‑fact) in a durable power of attorney, they are giving you broad authority to manage their finances if they cannot do so themselves. It is an honor—but it is also a legally binding fiduciary role that carries real liability. At Provident Law / Estate Planning LLC, we counsel agents across Alabama and Florida on how to serve properly. Below is an overview of the key power of attorney duties and best practices to follow.

1. What Is a Durable Power of Attorney?

A durable power of attorney is a legal document that allows the principal (the person who signs it) to appoint someone else—the agent—to handle their financial matters. “Durable” means the authority continues even if the principal becomes incapacitated.

2. Core Duties of a Power of Attorney Agent

A principal may grant their agent broad authority through a power of attorney. Once the agent accepts this role, they must fulfill the responsibilities outlined in the document and comply with applicable state laws. These typically include:

Duty	What It Means	Practical Tips
Act in the Principal’s Best Interest	You must put the principal’s needs ahead of your own.	Avoid any self‑dealing; do not comingle your funds with the principal’s funds.
Manage Money & Property Prudently	Pay bills, collect income, manage investments, file taxes.	Maintain a separate power of attorney checking account; use accounting software or spreadsheets.
Keep Accurate Records	Maintain receipts, bank statements, and a running ledger.	Respond to all of the principal’s questions and provide accountings upon request.
Follow the Scope of Authority	Only do what the document (and state law) allows.	Read the power of attorney carefully; when in doubt, ask an attorney before acting.
Communicate	Provide updates to the principal, family, or co‑agents when reasonable.	Share statements annually; respond promptly to reasonable inquiries.

3. Common Tasks You May Handle

• Banking: write checks, deposit funds, set up auto‑payments.

• Real Estate: pay mortgages, collect rent, sign listing agreements (if authority is granted in the power of attorney).

• Investments: work with financial advisors, rebalance portfolios.

• Government Benefits: file for Social Security, VA, or Medicaid benefits.

• Taxes: gather documents and sign returns on the principal’s behalf.

  
  

Always confirm the document allows the specific action, especially for gifting, changing beneficiaries, or creating trusts—these require explicit authority in Alabama and Florida.

4. Legal & Fiduciary Risks

Acting outside your authority or mismanaging funds can expose you to:

• Civil liability for losses or unauthorized gifts.

• Removal by the court at the request of the principal, co‑agent, or family.

• Criminal charges in cases of fraud or embezzlement.

  
  

Working with an estate planning attorney minimizes these risks and ensures compliance with the Alabama Uniform Power of Attorney Act or Florida Statutes Chapter 709.

5. Best Practices for a Power of Attorney Agent

1. Read the power of attorney from start to finish and note any special instructions.

2. Create a power of attorney file with copies of the documents, bank statements, and receipts.

3. Use separate accounts and never mix your money with the principal’s.

4. Document major decisions (e.g., selling a home) and keep written explanations.

5. Consult professionals like CPAs, financial advisors, or attorneys when unsure.

6. Update the principal (if able) and key family members to maintain transparency.

   
   

6. When Does Your Authority End?

• Revocation by the principal while competent.

• Death of the principal (see below).

• Court removal for cause.

• Expiration date, if stated in the document.

• Divorce if a legal action is filed with the court to end your marriage to the principal, or for your legal separation, unless the Special Instructions in the power of attorney state that such an action will not terminate your authority.

  
  

After the principal’s death, do not continue using the power of attorney; switch to the personal representative or trustee role if you are named in the will or trust. If you are not named as the personal representative or trustee, then you should work with the personal representative or trustee to provide them with the necessary information to carry out their duties under the will or trust.

Final Thoughts

Serving as an agent under a power of attorney is a crucial part of protecting a loved one’s finances and dignity. By understanding your legal responsibilities and following best practices, you can safeguard the principal’s assets and avoid costly mistakes.

Your Next Step

If you need guidance as to your duties as an agent under a power of attorney, or have questions about executing a power of attorney that fits your families’ needs, we invite you to contact our team at Provident Law / Estate Planning LLC. We are committed to making estate planning easy and will guide you through the process, ensuring your plan is tailored to your unique needs and goals. Whether you are creating a will, establishing a trust, planning for incapacity, or reviewing existing documents, we are here to provide the personalized guidance you need. Reach out today to schedule a consultation and take the next step to give your family peace of mind.

About the Author

Colin McMichen is an experienced attorney and the founder of Provident Law / Estate Planning LLC, a Birmingham, Alabama based firm. With a focus on estate planning and probate law, Colin is dedicated to helping individuals and families make estate planning easy.