Comprehensive Estate Planning And Probate Advocacy

Power of attorney provides limited authority

On Behalf of | Nov 17, 2022 | Estate Planning

A power of attorney (POA) grants a person the legal authority to act on behalf of another. Specifically, the individual authorized to act – the agent – may take care of the other’s business and personal matters for another person.

Importantly, this authority has limitations of time and scope. When one acts in violation of the limits of the POA, legal repercussions follow.

Death terminates a POA. A person authorizing the power – the principal – no longer has any property, personal or otherwise, upon their death. Thus, all property transfers to the principal’s estate.

Only the executor may distribute property from that point, whether according to a will or via an administrator through probate. This applies even in cases in which the amount of the estate may not require probate.

Costly punishments for exceeding authority

A recent court case exemplifies how exceeding the scope of a POA effects significant financial consequences.

A husband signed a POA to his wife in February 2014 that made her beneficiary of his checking and savings accounts. The wife placed proceeds of more than $160,000 from the sale of farm equipment into the account. After the couple divorced in 2016, the wife retained her ex-husband’s POA and served as executor after his death.

Upon learning the wife, not the estate, was the sole beneficiary of the checking and savings accounts, the husband’s two children sued.

A lower court found the wife had violated her duties under the POA through a conflict of interest.

Furthermore, the court required her to restore the checking and savings account to the estate and applied a surcharge. Through procedural hurdles, the court effectively upheld the lower court’s ruling.

Though the court did not require the wife to return the money to the husband’s checking and savings accounts, it upheld the ability to assign a monetary value to her conflict of interest.

Experience matters

Obligations to those who assume a POA remain in effect throughout the lifetime of the document. Those who accept them must understand the specifics of when and how to apply legal duties demanded by law. An attorney familiar with probate in Pennsylvania can offer guidance.