Agency by Necessity: Meaning in Estate Planning

What it is

Agency by necessity is a temporary legal relationship that allows one person to act on behalf of another when the latter cannot give explicit authorization. Courts recognize this doctrine in urgent or emergency situations where immediate action is required and no formal agent (such as a power of attorney or court-appointed guardian) is in place. The person exercising agency by necessity must act solely for the benefit of the incapacitated party.

When it arises

Common circumstances include:
* Medical incapacity or sudden illness that prevents decision-making.
* Emergencies requiring immediate financial, property, or personal-care decisions.
* Situations where formal legal authority (power of attorney, guardianship) is not yet established but delay would cause harm.

How it applies in finance and wealth management

In financial contexts, agency by necessity can involve:
* A broker, financial advisor, or another family member taking actions to preserve or manage investments when a client is incapacitated.
* Wealth managers stepping in to protect family assets, oversee trusts, or maintain liquidity until formal authority is granted.

These actions are usually limited in scope and intended to prevent loss or preserve value, not to make long-term discretionary changes without later ratification.

Role in estate planning

When someone becomes incapacitated before completing or implementing estate plans, an agent by necessity may:
* Arrange for payment or restructuring of debts.
* Maintain or protect estate assets (real estate, investments, collectibles).
* Ensure continued management of trusts or financial accounts until formal agents are appointed.

Estate-related tasks commonly involved:
* Writing or updating a will (when possible and valid under law).
* Setting up or adjusting trusts to limit estate taxes.
* Naming guardians for dependents.
* Appointing or acting as executor to carry out will provisions.
* Updating beneficiaries on life insurance, IRAs, and 401(k) plans.
* Making funeral or immediate end-of-life arrangements.

Legal limits and duties

Agents by necessity are bound by fiduciary obligations:
* They must act in the best interest of the incapacitated person and avoid self-dealing.
* Their authority is generally narrow and temporary—limited to what is necessary to prevent harm.
* Actions are subject to later court review and may require formal ratification.

Potential conflicts

Agency by necessity can provoke disputes, especially in high-net-worth estates where significant assets and multiple stakeholders are involved. Family members or other interested parties may challenge decisions made by the de facto agent, so documentation, transparency, and prompt steps to secure formal authority (power of attorney or guardianship) are important.

Key takeaways

• Agency by necessity provides a temporary means to act for someone who cannot consent.
• It is invoked in emergencies to prevent immediate harm or loss.
• Actions must benefit the incapacitated person and are limited in scope.
• In estate and wealth contexts, it helps preserve assets and address urgent financial or administrative needs until formal authority is established.