Providing someone a power of attorney to act on your behalf is part of a good estate plan. Sometimes though, usually when you are elderly and need help handling your finances, or become incapacitated, the person you selected abuses the power. This can lead to dispute that may arise during your life or after your passing.
What is a Power of Attorney
A Power of Attorney is usually a statutory form wherein an individual can appoint a person or persons to act on the individual’s behalf to make financial decision during the lifetime of the individual. The person who has to power to act is sometimes called the “attorney-in-fact.” This person is not an attorney, but is permitted to act on behalf the individual for financial decisions outlined in the Power of Attorney. You would have to properly execute the Power of Attorney to be valid and most of the time requires either a notary or witnesses. Most importantly, you have to have the capacity to execute the power of attorney.
The Powers delineated in the Power of Attorney can be narrow or broad. The Power of Attorney can allow the attorney-in-fact to make banking decisions, real estate decisions and even gift making decisions. These powers have to be expressly allowed in the Power of Attorney especially pertaining to gift giving, which can require additional witnesses and signatures of the individual to make sure the individual knows she or he is giving this right to the attorney-in-fact.
Most of the time a Power of Attorney is durable, meaning that it is valid while the person is alive and well, and while the person is incapacitated. There are other power of attorneys, sometimes called a springing power of attorneys, which only takes effect when a person becomes incapacitated.
Where Disputes Arise
Where dispute mostly occur is when the attorney-in-fact acts outside what is permitted in the power of attorney. This almost invariably occurs when the attorney-in-fact is accused of self dealing (using the individual’s money for their own purposes rather than for the benefit of the individual). Other disputes arise when there is a claim that the individual lacked capacity to execute the power of attorney.
Who can Make a Claim Against An Attorney-In-Fact alleged to have abused the Power
During the lifetime of the individual, the individual who executed the Power of Attorney can revoke the power and/or make a claim against the attorney-in-fact if there is alleged an abuse of power. Unfortunately, what happens is the individual becomes incapacitated and cannot make the claim. Many family members want to make the claim on the individual’s behalf, but they do not have standing to do so (the right to do so) while the person is still alive. In order to receive standing, a family member would have to commence a guardianship proceeding to become the guardian or conservator of the individual.
If the individual who executed the power of attorney is deceased and family members believe that there was an abuse of power, then the personal representative of the estate can make a claim against the former attorney-in-fact. In many circumstances the attorney-in-fact is the same person as the personal representatives. In this case, other family members can motion the court to remove the personal representative arguing a conflict of interest and have the court appoint a successor personal representative.
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