This question seems to be arising more and more often lately. Most estate planning attorneys recommend their clients create a durable power of attorney (DPA), naming a close, trusted family member (usually a spouse or adult child) to serve in the capacity as their attorney-in-fact to manage their finances and other personal business in the event of temporary or permanent incapacity. It’s a very smart estate planning tool for obvious reasons, but it is also one that is extremely susceptible to abuse by the attorney-in-fact. After all, the activities of an attorney-in-fact are not court-monitored or approved, which makes it very enticing for one to help themselves.
Over the past couple of years, there seems to have been a significant rise in the number of lawsuits filed in Florida for breach of fiduciary duty arising from self-dealing conduct with DPA’s. What’s more, is that many lawyers are taking the position in defense of those claims that the DPA permitted such conduct. The cause of much of this confusion appears to be two-fold. First, the plain language contained in the DPA’s is being taken literally. Second, a recent decision of the Fourth DCA in Beane v. SunTrust Banks, Inc., 43 So. 3d 922 (Fla. 4th DCA 2011) is being used to bolster the former.
Most DPA’s grant broad powers to the attorney-in-fact, which includes the powers to invest money, make gifts to “any person,” and transfer property. Further, most DPA’s also contain a catch-all power that purports to authorize the attorney-in-fact to “do anything regarding my property and affairs that I could do myself.” Many have taken this language literally to mean that the attorney-in-fact is authorized to transfer property or make gifts to anyone, including himself/herself. However, such a literal interpretation would be incomplete disharmony with Florida’s Durable Power of Attorney Act codified in Chapter 709 Florida Statutes. Section 709.2114 Florida Statutes imposed strict limitations on what an attorney-in-fact may do with a DPA, regardless of the language in the DPA itself. For instance, an attorney-in-fact must act only within the scope of authority granted in the DPA. Fla. Stat. §709.2114(1)(a). An attorney-in-fact must act in good faith, and may not act in a manner contrary to the principal’s best interest. §709.2114(1)(a)(2)-(3). Further, an attorney-in-fact must attempt to preserve the principal’s estate plan, to the extent actually known to the attorney-in-fact. §709.2114(1)(a)(4). An attorney-in-fact has a duty of loyalty to the principal and must act solely for the benefit of the principal. §709.2114(2)(a).
To condone self-dealing with a DPA would take all the wind out of the sails of Chapter 709 Florida Statutes. Nevertheless, many have interpreted Beane v. SunTrust Banks, Inc., 43 So. 3d 922 (Fla. 4th DCA 2010) as standing just for that proposition. In Beane, a decedent executed a DPA naming her niece as her attorney-in-fact. The DPA granted the niece the catch-all power to act for her aunt “in my name, place, and stead and in any way which I myself could do if I were personally present.” The next day, the niece transferred $150,000.00 from the decedent’s SunTrust account (which was payable-on-death to one Frances Wallin) to another individual’s account. The personal representative of the decedent’s estate sued SunTrust for allowing the transfer, relying heavily upon §709.08(7)(b)5 Florida Statutes (the Statute then in effect that governed DPA’s), which expressly prohibited an attorney-in-fact from “creating, amending, modifying or revoking any document or other disposition effective at the principal’s death.” The Fourth DCA held that the above-quoted catch-all power in the decedent’s DPA authorized the niece to withdraw funds from her aunt’s SunTrust pay-on-death account and that SunTrust Bank could not be held liable for honoring the withdrawal.
The key distinction between the Beane case and other self-dealing cases is that Beane did not actually involve self-dealing. In Beane, the niece withdrew funds from a pay-on-death account and transferred them to a third person, not herself. Yet, for some inexplicable reason, defendants in more recent DPA cases have viewed the Beane decision as a rubber stamp on their literal interpretation that broad catch-all powers contained within a DPA somehow permit self-dealing. Perhaps the Fourth DCA will clarify the scope and intent of its Beane decision if given the opportunity.
If you have a question about a power of attorney, contact the attorneys at Adrian Philip Thomas, P.A. for a free consultation.