Acting or serving as a fiduciary usually involves the knowing exercise of authority: serving as trustee of a trust or executor of an estate implies the knowing assumption of—and may require the appointment to—a formal fiduciary role. When formally serving as a fiduciary, the fiduciary’s actions generally must be consistent with the provisions applicable to the fiduciary’s status under state law as subject to the governing or appointing instrument, for example: a will, trust, or power of attorney. Not all roles implicating fiduciary obligations in Virginia as are as obvious as being named the executor under a will or the trustee in a trust agreement, however.
When properly empowered to do so under a governing instrument, the fiduciary of an estate or trust in Virginia may employ attorneys-in-fact or agents. If granted such powers, and if the fiduciary deems the employment of such persons “to be needful for the proper administration of the trust or estate,” the fiduciary may engage such agents without liability for any neglect, omission, misconduct, or default of any such agent provided the agent was selected and retained with reasonable care. This allocation of responsibility should make both parties carefully consider the consequences of the agent’s actions on behalf of the fiduciary.
Before being willing to serve on behalf of an estate’s or trust’s fiduciary, the agent to any fiduciary-agent arrangement may want to consider the specific contours of the agent’s intended role. A prospective agent or attorney-in-fact may wish to document the scope of the agent’s authority and provide for any applicable limitations of liability. When it comes to liability, an executor or trustee acting in good faith generally is entitled to the costs of, or reimbursement for, the fiduciary’s legal defense or other legal action from the assets of the estate or trust. Depending on the nature of the agency, a fiduciary’s agent, however, may not have access to similar sources of direct indemnification.
From the fiduciary’s perspective, too, a well-defined agency arrangement may become a part of establishing reasonable care in the retention of the agent. These concerns may be heightened if the fiduciary believes that the agent will be called upon to take action in matters with which the fiduciary is unfamiliar or incapable of providing authoritative instruction. In most cases, careful planning is recommended when undertaking an agency or attorney-in-fact relationship for, or on behalf of, a fiduciary.