Virginia’s Agent Recordkeeping and Reporting Requirement
Recordkeeping and accounting are important parts of an agent’s job under a power of attorney (“POA”). Recordkeeping is required under both the Uniform Power of Attorney Act (“UPOA”) and the Virginia Uniform Power of Attorney Act (“VPOA”), and serves a public policy purpose in ensuring proper fiduciary management and accountability. However, who has a right to examine these records—and what if you do not want your fiduciary records to be viewed by certain individuals? Under Virginia law, it is critical to plan for this in your POA. Otherwise, your agent’s records may be reviewable by certain categories of individuals, referred to herein as “interested parties,” you never thought would see your financial information.
Both the UPOA and VPOA require agents to keep records and receipts of actions taken on behalf of the principal and require disclosure of such records to the principal or the principal’s guardian, conservator, or other fiduciary if the principal or other fiduciary requests disclosure, or if the agent is so ordered by a court. However, the VPOA expands on this, requiring that agents provide similar records and accountings to certain interested parties if the interested party “has a good faith belief that the principal suffers an incapacity or, if deceased, suffered incapacity at the time the agent acted.” See Va. Code § 64.2-1612(I). According to the VPOA, this ability to view records is available to individuals authorized to make health care decisions for the principal; the principal’s spouse, parent, or descendant; the principal’s sibling, niece, or nephew; beneficiaries to the principal’s estate; the adult protective services unit of the principal’s local social services; among other individuals.
While this provision of the VPOA is aimed at ensuring incapacitated principals are not taken advantage of by their agents, it also greatly expands the scope of who can potentially review the agent’s actions. This power given to interested parties could have significant implications for many principals and agents alike, as it could open the door for family members or beneficiaries to review and interfere with the agent’s decisions by bringing an equitable accounting action against the agent in court.
Fortunately, the VPOA notes that the principal can “otherwise provide[]” in the POA that the agent should not provide receipts to certain individuals or third parties. Specifically, a principal can include in their POA language stating that they do not want their agent to disclose receipts, disbursements, or other similar information to anyone, any individual, or any select group of individuals. This helps principals who anticipate issues with specific family members or others seeking to review their agent’s actions who would never benefit from the estate plan to get ahead of the problem and permit their agent to refuse certain individuals the ability to review the agent’s disbursements.
For example, in Phillips v. Rohrbaugh, a Virginia circuit court found that the principal’s power of attorney specifically exempted his agent from having to disclose records related to disbursement, even with circumstantial evidence of nefarious acts, where the power of attorney stated that “my agent shall never be required to make disclosure or inspection of my affairs, or their actions as my agent… to any third party.” Id. (emphasis in original). The court upheld this decision despite family members of the principal suspecting improper actions of the agent. Thus, as demonstrated by the court, while Virginia law may by default require transparency in the agent’s management of the principal’s affairs, this requirement can be written around if the situation warrants such a limitation on transparency.
The Phillips power of attorney provided the agent a broad exemption from disclosure, which may not be advisable for everyone. The ability to review an estate’s accountings and disbursements made by an agent is a critical component of building trust and helps protect an estate’s assets from an agent seeking to engage in self-dealing. Transparency is generally not problematic for an agent with honest intentions and good recordkeeping skills. However, there are many reasons you may wish to protect your agent from certain individuals and exclude your agent from Virginia’s default requirement to disclose to interested parties. For example, certain individuals may not benefit from your estate plan and questions they ask may be a form of harassment. At Schooley Law Firm, we want to ensure your estate plan is customized to your specific family and your personal needs, and always seek to obtain a comprehensive picture of your situation to get your planning right.
If you need help with creating or updating your power of attorney, contact us today to schedule a consultation and start planning for your future.