The more I do this blogging thing, the more I find that the best topics come from interesting questions I get from my clients. So, continuing the precedent I set last time, this week I will take on another client question I recently received about Power of Attorney. Specifically, what happens to an old power of attorney when a new one is signed?
What is ‘Power of Attorney’?
First, as always, I want to make sure we are all on the same page by explaining, in simplified terms, what “power of attorney” means; at least for the purposes of this discussion.
Despite the name, it has nothing to do with lawyers. Rather, power of attorney is an agency agreement. If you give someone power of attorney, you are called the “Principal,” and you are giving someone else, called the “Agent” or “Attorney in Fact,” the ability to act on your behalf. Depending on the scope of the power of attorney, your agent can open and close bank accounts, take out loans, buy and sell real estate, sign contracts, leases, file lawsuits; all in your name. The most common kind of power of attorney, called a “general durable power of attorney,” does not have a predetermined termination date (the ‘durable’ part) and gives the agent broad powers to pretty much stand in your shoes and do anything you could do (the ‘general’ part).
Obviously, this is a powerful position of trust that you should not enter into lightly. The only requirement to appoint an agent in this manner is that the agent be old enough to contract, and the only requirement for the principal is that he is competent and knows what he is doing when he assigns his rights to his agent.
The agent is a fiduciary and is prohibited from self-dealing and other types of mismanagement, but other than that, he is broadly empowered to act on the principal’s behalf. But that does not mean the agent’s powers are plenary, nor are they irrevocable. The power of attorney may not be durable, and may specify an end to the agreement. But even if it doesn’t, the principal can revoke a power of attorney for financial mismanagement, or for any reason at all, at any time. He can end his agent’s office simply by signing a revocation. He can also revoke it by signing a new power of attorney naming someone else as his agent. Because the grant of agency powers is unilateral, if he is fired, there is nothing the agent can do about it. But what happens if, after the power of attorney is granted, the principal becomes infirm and can no longer protect himself against an unscrupulous, self-dealing agent?
My client called to complain that a power of attorney his mom had executed naming him agent had been rejected by her bank. The reason: they told him his mother had executed a new power of attorney naming his brother agent, and his brother had simply presented it to the bank to get control of their mother’s account. The minute my client’s mom signed the new power of attorney, his agency ended, and he had no further say in her affairs (the bank’s decision to even share these details with my client was questionable, since he was no longer empowered to act for his mother. Banks have legal departments which are anally retentive to a fault, and if they knew,they would likely rain down apoplectic rage on the poor banker who tried to help out my guy by divulging these details. But don’t worry, I won’t tell if you don’t).
So that created a bit of a conundrum. But that was nothing compared to what he found out next: his brother had moved their mother out of her house, the house they’d both grown up in, and was selling it. He is absolutely convinced his brother is going to pocket the funds, but until it happens, he can’t prove it. He figured, by the time the house gets sold and the funds are gone, it will be too late. What can he do?
Revoking a Power of Attorney.
I know what you are thinking. “Duh. Get his mom into your office, and have her sign a new power of attorney revoking the second one and reappointing your guy as agent!” Well, I thought of that, and so did my client. Except for one problem: in the years since I last saw her, when she signed the first power of attorney, Mom has been diagnosed with dementia. That was why he called me: if she has dementia, how is it possible for her to give power of attorney?
Unfortunately, it is not quite that simple. As anyone who has dealt with a relative with dementia can tell you, they occasionally snap out of it and have lucid moments. All a power of attorney requires is that the principal knows what he is doing at the moment he signs the agreement, so it is presumptively valid. If you want to challenge the agreement’s validity, a diagnosis of dementia is illuminative, but not dispositive.
That said, I cannot in good conscience have my client drag his mom down to my office to sign documents on the off chance that at that particular moment she becomes lucid and understands what she is doing. Anyway, he didn’t want to put his mom through that either. So that left my client with very few options.
The first option, the #FreeBritney thing which I touched on in a previous post, is interdiction. It is the process of petitioning a court to manage some or all of the subject’s affairs because, due to some age-related or other infirmity, they can no longer manage themselves and/or communicate effectively to manage their affairs. This would, as I explained to my client, immediately invalidate a durable power of attorney the minute it is signed by the court. All that would be left would be to get the court order to his brother, the bank, and the title company. My client could also get an injunction if he wanted to, but that probably wouldn’t even be necessary. No title company is going to go forward with a real estate transaction under those circumstances. That would solve the problem.
The main stumbling block is the cost. In most cases, you will need an independent medical examiner to examine the subject, write a report and then testify at trial. The dirty little secret of medical experts is that they generally testify to whatever you pay them to say, but it costs an arm and a leg to get them to do so. I could pretty much guarantee she would be interdicted, but the cost to do it was orders of magnitude more than he had originally contemplated in just getting a new power of attorney. Also, I could not guarantee that he would be appointed her curator as opposed to, say, his brother, which would defeat the purpose.
Perhaps more importantly, my client already had concerns about dragging his mother through a family dispute with dueling powers of attorney. He had even more serious concerns about putting his mother through that emotional ordeal of being sued, deposed, and having to testify at trial, even if her house was at stake. When it comes down to it, she is at the end of her life, and the real economic loss would not be borne by her, but by him when she passes. So that was out.
The Last Resort.
My client’s mother would not, and likely could not, revoke the offending power of attorney. Interdiction is an option, but an expensive and painful one. How else can a durable power of attorney end? There’s only one other way; the way all things inevitably end: with death.
I cannot tell you how many times I have disappointed clients who confidently come in to tell me they have no worries about a contest of their deceased parent’s estate, even though they left no will, because their parent gave them power of attorney before they died. Bad news: the moment you die, power of attorney dies with you. It can no longer be used to manage your affairs, and it gives absolutely no leverage in a succession where multiple people vie to be appointed the succession representative. The once-agent thought he had things all sewn up, only to find out he is holding a now useless piece of paper.
But in this case, my client was thrilled: he doesn’t have to put mom through a grueling fight to control her affairs. All he has to do is wait. If his brother pockets or co-mingles the funds from the sale of the house, he may think it is too late for anyone to challenge him once his mother is gone. That would be a big mistake. It is no “get out of jail free” card when the person you stole from has died. When she is gone, the offending agency agreement is dead too, and the playing field is level again. My client can run to court, open the succession, and if he knows his brother self-dealt, have the succession demand an accounting and sue his brother for breaching his fiduciary duty. Money is fungible, and my client’s brother is already reasonably well off. There will be no place he can hide that money that will prevent a reckoning.
I know this all sounds horrible and cynical in the telling. “Wait for mom to die, then sue his brother? That’s terrible!” But everyone gets in a bad situation at some point; backed into a corner with no way out. What may sound awful to someone on the outside can be a godsend to someone in the thick of the dilemma.
Sadly, at the end of life, people often become the rope in a tug of war between greedy heirs. Good planning can certainly safeguard against most of these unscrupulous actors, but life has a way of throwing the unexpected at you when you are least able to cope with it. In this case, my client was despairing at his lack of options before we put our heads together and figured out a creative solution that works for him. While there is sadness all around this story, we sketched out a way to keep a bad situation from becoming tragic through a little creative thinking, cold planning, and patient resolve.
If you have a seemingly insurmountable problem involving end-of-life decisions, a creative, thoughtful and experienced attorney can provide you solutions you may never have thought of on your own. Schedule a free consultation today, and discover what options are right in front of you that you may not have even considered.