How Much Power Does a Power of Attorney Really Give?
As probate and trust litigation attorneys, day in and day out, we deal with claims for undue influence, lack of testamentary capacity, and improper execution of testamentary documents. However, one issue that comes up periodically but often overlooked, is the breach of fiduciary duty by an attorney-in-fact by improperly using a power of attorney. Often, a power of attorney is used to the detriment of the principal, and by extension the principal’s heirs. It is standard practice for estate planning lawyers to recommend and prepare a durable power of attorney as part of a client’s estate planning package, as it is important for a mechanism to be in place so the principal’s family can manage his/her financial affairs in the event the principal becomes incapacitated.
Undue influence and breach of a power-of-attorney typically go hand-in-hand, primarily because the undue influencer is usually named as attorney-in-fact in a durable power of attorney. Thus, a trust and estate litigator should not limit the focus of litigation strictly to invalidating the estate planning documents, but should also be on the look-out for transfers that occurred shortly before death. Such transfers may be the basis for additional causes of action in the lawsuit.
Imagine a case that involves siblings and their grandmother’s Transfer-on-Death (TOD) account. The grandmother opened a brokerage account and funded it with approximately $500,000.00 naming her granddaughters as equal beneficiaries. The grandmother executed estate planning documents, including a Revocable Trust, Last Will and Testament, and Durable Power of Attorney. In her Will, she nominated one of her granddaughters as Personal Representative and sole beneficiary of her estate; and also named her as her attorney-in-fact in the durable power of attorney. One month before she died, her granddaughter used the Durable Power of Attorney to revoke the TOD agreement and to transfer the account to herself effectively disinherited her own sister.
The primary issue is, what power was given to the granddaughter in the power of attorney. While there is an abundance of cases in Florida that address the subjects of undue influence, lack of testamentary capacity, and the like, there are no Florida cases that deal with the specific issue as to the extent of an attorney-in-fact’s power to revoke a TOD agreement. However, Section 709.08(7)(b)(5) Florida Statutes states in pertinent part: “Notwithstanding the provisions in this section, an attorney, in fact, may not…[c]reate, amend, modify, or revoke any document or other disposition effective at the principal’s death…unless expressly authorized by the power of attorney.” Furthermore, in his July 2002 Florida Bar Journal article titled Florida Durable Powers of Attorney—Exploring the Limits of an Agent’s Authority, Peter B. Tiernan, Esquire opines that a literal reading of Section 709.08(7)(b)(5) would suggest that an attorney-in-fact has no authority to revoke a TOD account since such action would constitute a modification or revocation of a disposition effective upon the principal’s death.
There is also an obvious self-dealing nature surrounding an attorney-in-fact’s conduct in revoking a TOD agreement for her own benefit. Section 709.08(8) Florida Statutes states that an attorney-in-fact is required to observe the same standard of care applicable to trustees as described in Section 736.0901 of the Florida Trust Code. Section 736.0901 refers the reader to the Prudent Investor Rule contained within Chapter 518 Florida Statutes, which imposes a duty to invest and manage the principal’s funds “as a prudent investor would, considering the purposes, terms, distribution requirements, and other circumstances of the trust.” This chain of statutory references leads to the conclusion that despite language in a durable power of attorney expressly authorizing the agent to revoke a TOD account, she has a fiduciary obligation to refrain from doing so at least to the extent that such activity directly benefits her.