What Are the Fiduciary Duties of a Power of Attorney?

A trustworthy person enters a legal role with significant responsibilities when they agree to act under a power of attorney in Virginia. Many people do not realize that this role creates a fiduciary relationship, requiring the agent to place the principal’s interests above their own. This relationship is more than a formal arrangement. It carries legally binding duties that Virginia state courts take seriously.

Failing to understand these responsibilities can lead to serious consequences, including financial losses, damaged relationships, and even criminal charges. Understanding what Virginia law requires of fiduciary agents helps protect both principals and agents from unintended violations that may have long-term effects.

What Is a Fiduciary Power of Attorney?

A power of attorney, as defined in Virginia Code § 64.2-1600, is a written instrument that authorizes an agent (attorney-in-fact) to act on the principal’s behalf. Once an agent accepts the role, Virginia Code § 64.2-1612 imposes fiduciary duties requiring the agent to act in good faith, within the scope of authority granted, and in the principal’s best interests.

All valid powers of attorney under Virginia law carry fiduciary obligations once the agent accepts the role. These duties include loyalty, good faith, and prudent action, regardless of whether the document is labeled as a general or durable power of attorney. Whether managing financial accounts or handling legal matters, the agent’s loyalty must remain with the principal. Powers related to healthcare decisions are governed separately under Virginia’s Health Care Decisions Act (§ 54.1-2983 et seq.). Virginia law defines this role as one of trust, requiring agents to act with greater care and honesty than in ordinary business relationships.

What Are the Duties of a Fiduciary Power of Attorney in Virginia?

Virginia’s Uniform Power of Attorney Act sets clear legal expectations for agents. These fiduciary duties include acting in good faith, remaining loyal to the principal, avoiding conflicts of interest, and keeping transactions transparent. Agents must exercise the same level of care, skill, and diligence that a reasonable person would use in similar circumstances.

Agents are required to place the principal’s interests ahead of their own. The fiduciary role demands a higher standard of conduct than typical financial or legal relationships.

If a court appoints a conservator or guardian to manage the principal’s estate, the agent remains accountable to both the principal and the court-appointed fiduciary under Virginia Code § 64.2-1606. This responsibility includes handling affairs with prudence and maintaining accurate records.

Duty to Account

Agents acting under a power of attorney in Virginia must keep detailed and accurate financial records of all transactions made on the principal’s behalf. This includes receipts, bank statements, transaction logs, and ledgers that show how funds were managed or spent.

Maintaining proper records is more than good practice. It is a legal requirement. Failure to keep clear documentation can lead to allegations of mismanagement or breach of fiduciary duty under Virginia law.

Duty of Loyalty

Virginia law requires agents to avoid self-dealing and always act in the best interests of the principal. This legal duty prohibits agents from using their authority for personal gain.

A conflict of interest arises when the agent’s personal interests compete with those of the principal. If the agent takes unauthorized actions that benefit themselves, such as transferring assets or issuing loans without approval, it may be considered a serious breach of fiduciary duty.

Duty to Protect, Preserve, and Maintain

Agents have a legal obligation to actively protect and manage the principal’s assets. This includes safeguarding property, arranging for appropriate maintenance, and managing investments responsibly.

Decisions should reflect sound judgment and balance both short-term needs and long-term financial security. Agents must consider how their actions impact the principal’s overall financial well-being, not just the preservation of current assets.

Duty to Disclose

Fiduciary agents in Virginia must communicate transparently with the principal. They are required to disclose significant financial decisions and provide documentation upon request.

This includes sharing records with the principal or a legally authorized third party, answering questions about account activity, and identifying any potential conflicts of interest. Open communication helps maintain trust and allows the principal to monitor how their affairs are being handled.

Duty to Perform Tax Filings

Agents managing a power of attorney in Virginia are responsible for handling the principal’s tax matters accurately and on time. This includes filing federal and state tax returns, making timely payments, and responding to any tax notices or inquiries.

Neglecting these duties can result in penalties, interest charges, or complications with the IRS. Agents must stay informed about current tax requirements or seek professional assistance when appropriate.

Duty of Confidentiality

Virginia law requires agents to protect the principal’s personal and financial information. Confidentiality applies to health records, account details, and other private matters.

Agents may only share this information when legally required or when doing so clearly serves the principal’s best interests. A breach of confidentiality can harm the principal and may also result in legal consequences for the agent.

Duty to Properly Invest

Agents must manage the principal’s investments with care and according to Virginia law. Investment choices should reflect the principal’s financial goals, estate plan, and risk tolerance.

Agents should avoid high-risk or speculative investments that could threaten the principal’s financial stability. Prudent investment management includes diversification and consideration of both present and future financial needs. Decisions that serve the agent’s interests rather than the principal’s may be considered a breach of fiduciary duty.

Can Fiduciary Duties Be Waived or Modified in Virginia?

Virginia law allows limited changes to fiduciary duties through a power of attorney document. While certain responsibilities may be narrowed or expanded based on the principal’s preferences, core duties such as loyalty and good faith generally cannot be removed.

Any changes must comply with Virginia legal standards. The document may adjust the scope of the agent’s powers, but it must preserve the fiduciary relationship that protects the principal’s interests.

What Is a Breach of Fiduciary Duty?

A breach of fiduciary duty occurs when an agent fails to uphold their legal obligations to the principal. In Virginia, this may involve acting outside the authority granted, misusing funds, or placing the personal representative’s interests ahead of the principal’s needs.

Examples include making unauthorized gifts, combining personal and principal assets, or failing to manage finances responsibly. These actions can result in civil liability and, in some cases, criminal charges for theft or fraud. Virginia courts treat such breaches seriously due to the level of trust involved in fiduciary relationships.

What Are the Remedies for a Breach of Fiduciary Duty in Virginia?

When an agent fails to meet their fiduciary obligations, Virginia law provides several remedies. Courts may order the return of misused assets through restitution and can remove the agent from their role.

The agent may also be held personally responsible for financial losses, including attorney’s fees and court costs. In more serious cases involving fraud, embezzlement, or theft, criminal penalties such as fines or jail time may apply.

Why Choose Williams DeLoatche, P.C.

Williams DeLoatche, P.C. provides legal guidance in fiduciary law and has estate planning attorneys who can help clients throughout Virginia.

We take a practical approach grounded in Virginia law, helping clients understand their rights and responsibilities when navigating fiduciary relationships. When you establish an attorney-client relationship with our law office, you will receive legal advice and representation. If you need assistance drafting a power of attorney, our legal team is here to support you with clarity and care.

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Have Questions About Fiduciary Duties? Schedule a Consultation With Our Legal Team.

If you have concerns about power of attorney responsibilities or fiduciary obligations in Virginia, our attorneys can help you protect your interests and gain peace of mind. Williams DeLoatche, P.C. offers confidential consultations to discuss your situation and provide practical legal guidance.

Call our law firm at 757-787-8900 or use our contact form to schedule an appointment with a member of our legal team.