Is the agent of a durable power of attorney liable for the principal's debts?

Full question:

Is the Agent of the Durable Power of Attorney responsible for the bad debt incurred by the principal in the state of Wisconsin?

• Category: Power of Attorney
• Date: 04/07/2025
• State: Wisconsin

Answer:

Generally, an agent under a power of attorney is not personally liable for the principal's debts, provided they do not exceed or abuse their authority. Courts will assess whether there was a breach of fiduciary duty based on the specific facts and circumstances of each case.

Factors considered may include whether the agent personally benefited at the principal's expense or failed to disclose important information. For example, did the agent divert funds for personal use or fail to disclose financial issues? Courts will evaluate the agent's actions against the standard of care expected from a reasonable person in similar situations.

To establish a breach of fiduciary duty, the following elements must be present:

1. The plaintiff and defendant have a relationship where the plaintiff trusts the defendant, and the defendant assumes a duty to protect the plaintiff.
2. The defendant breaches their duties to the plaintiff.
3. The plaintiff suffers damages as a result.

Defenses against a breach of fiduciary duty claim may include:

1. The statute of limitations has expired.
2. No fiduciary relationship existed (e.g., if the parties engaged in an arm's length transaction).
3. Lack of standing to sue.
4. Approval by the plaintiff after full disclosure.
5. The business judgment rule, which protects actions taken in good faith for the corporation's benefit.