Hopefully, each of us has at least one person we trust to aid us in a time of distress or illness. When it comes to financial matters, we hope that those people are savvy in asset management, record keeping, and tax compliance. Most often when selecting fiduciaries, such as agents under a power of attorney, we focus not on accounting skills but character traits. Also frequently considered is how to be inclusive of family members, to avoid ill feelings from emerging. The primary question when creating a power of attorney becomes not just whom we should select, but what guidelines to offer if we select more than one agent.
Our inclination to select trustworthy representatives is often guided by emotion-laden factors. Parents will select from among their children, often in age order, or choose an agent because they fear a child will be insulted if not chosen. Others choose agents by the geographic proximity of their children. This geographic positioning might not align with the skills needed to manage assets or the virtue needed to be scrupulous as a fiduciary responsible for another person’s money.
Rather than select one person to serve as an agent, you might wish to designate two or three people to serve simultaneously. The appointment of multiple agents is its own ordeal. We should ask, is it ever a good idea to appoint more than one person as the agent?
Where there are two or more children, a person might consider appointing them all as co-agents. Co-agency begs several critical questions.
The first question to ask is how well do they get along? Even for people who have had a good relationship, the past may not be prologue when it comes to handling assets. Siblings that have gotten along well may have a falling out over the management of a parent’s assets. The tension rises when those assets might someday become an inheritance. Financial decisions and the benefits to be derived from those decisions can turn friends into enemies. Add to the tension that might arise between two fiduciaries the possibility that either one might have a spouse who offers their own strong opinions. There is no prescriptive formula to force co-agents to cooperate and remain civil.
The second question is to ponder how they will operate efficiently together. If co-agents are geographically close and can devote time to their work as fiduciaries, then the cooperative approach may well work. The danger is when co-agents are required to work jointly but are unable to coordinate efforts. When one agent is perhaps unavailable due to travel, work or illness, there is a likelihood that needs will go unmet.
With the appointment of co-agents, we can also allow them to operate individually. It is possible to have co-agents where each has the authority to make binding decisions, operating independently of the other. Where there is great trust, co-agents working independently is possible. Where suspicion and mistrust are present, the co-agents should not be designated to act independently.
If co-agents are selected, then the document also must incorporate a standard by which we can determine when one is absent, unavailable, or incapacitated. The requirement for agents to act together cannot also be an impediment to meeting the financial needs of the Principal.
There may be an added benefit to appointing co-agents. When one agent acts alone, they might fail to keep other interested persons informed. A lack of information causes suspicion. The sharing of responsibilities usually entails the sharing of information.
Another concern is protection from financial abuse by an agent acting individually. When two or more are appointed to serve in fiduciary roles, there is a greater likelihood that all will be treated fairly, and actions will be taken appropriate to the documents and laws. With one person acting alone, there is a greater risk of abuse.
The primary lesson is to consider the skills and the availability of any person who might serve as an agent under a power of attorney. There are challenges both in naming only one person to serve as an agent or naming co-agents to serve. The best plan is to select the people most trustworthy in our lives who have the skills to perform as a fiduciary.