Successor Agents in Powers of Attorney for Property Do Not Initially Have Fiduciary Duties

It is customary to have a Power of Attorney for Property in an estate plan.  In the document, an initial agent is designated as well as successor agents.  The document can be effective immediately, but is usually effective upon incapacity of the principal (the person for whom the Power of Attorney was created).  It is common for a spouse to be named as the initial agent and for a child or children to be named as successor agents.

Under Illinois law, an individual named as an agent in a Power of Attorney for Property owes a fiduciary duty to the principal.  This means the agent under the Power of Attorney has a “duty of care” to act in the best interests of the principal.  Any transaction between the agent and the principal that benefits the agent raises a presumption of fraud if the agent is acting under the Power of Attorney.

During the lifetime of the principal, when the principal is making his or her own decisions regarding his or her property and the Power of Attorney for Property is not in effect, the principal may sell land, or a vehicle, or make a monetary gift, or otherwise transact business with his or her children.

The Illinois Supreme Court recently stated in Estate of Alford v. Shelton, 2017 IL 121199 (2017), that until successor agents step into the primary agent role, those successor agents owe no fiduciary duties to the principal.  This means no “duty of care” applies and the successor agent may enter into transactions with the principal without looking out for the principal’s best interests.  However, once the successor agent becomes the agent, fiduciary duties arise.

This decision will ease the scrutiny surrounding common transactions within a family when a parent has full possession of his or her faculties and a Power of Attorney for Property is created years before an adult child is expected to serve as a successor agent.

It should be noted, that although a successor agent of a Power of Attorney for Property owes no fiduciary duty to the principal, that person may owe fiduciary duties in another capacity if they are currently acting as a fiduciary in another capacity such as trustee or guardian.