By: Teresa Molinaro
Our firm drafts Minnesota Statutory Short Form of General Power of Attorney forms (hereinafter “power of attorney”) routinely as part of our estate planning services. The purpose of the form is to designate an attorney-in-fact to act on behalf of a principal (i.e. the person executing the form). Contrary to popular belief, the attorney-in-fact is not authorized to act only when someone becomes incapacitated. The attorney-in-fact can act as soon as the principal executes the document. The power of attorney form is effective until it is revoked or on the death of the principal.
In most cases, there are no issues with the attorney-in-fact and their actions. However, our firm fields several inquiries regarding potential abuses of power by attorneys in fact. This article discusses the remedies available when an attorney-in-fact abuses their powers under a power of attorney form.
Powers Granted to Attorneys in Fact
Power of Attorney forms are powerful documents. Essentially, a principal is granting their attorney-in-fact a wide range of powers, including, but not limited to, the power to enter into real property transactions; bond, share, and commodity transactions; banking transactions; beneficiary transactions; gift transactions; and fiduciary transactions. The powers granted are extremely wide ranging and far reaching. We have extensive conversations with our clients to ensure that they understand how powerful these forms can be.
Powers Not Granted to Attorneys in Fact
The power of attorney form does not grant the attorney-in-fact to make health care decisions on behalf of the principal. That is done through a health care directive, which is a separate document.
Abuses of Power of Attorney Forms
Our office frequently receives calls from individuals regarding attorneys in fact abusing their powers under a power of attorney document. The abuses can range from outright theft from the attorney-in-fact, but more commonly involve gifts or reimbursements made to the attorney-in-fact or questions about the decision making of the attorney-in-fact. Potential clients frequently ask what remedies they have in these types of cases.
Referrals to Adult Protective Services
The first recommendation to potential clients in these types of cases is to call adult protective services for the county of residence of the principal. Adult protective services may decide to involve law enforcement and may investigate the case. If so, the attorney-in-fact may be criminally prosecuted for the misuse of the power of attorney form. The attorney-in-fact may be required, as part of the criminal case, to pay restitution to the principal. This type of proceeding is most likely in the cases of outright theft of a significant amount and when the principal is still alive.
Questions about Attorney-in-fact’s Decision Making
The principal specifically chose the attorney-in-fact to act on their behalf. Although other interested parties may question some of the decisions that the attorney-in-fact makes on behalf of the principal, the principal is the person who chose that person. The courts typically give the attorney-in-fact latitude in their decision making; the courts are not going to nitpick the attorney-in-fact’s decisions. However, if significant lapses of judgement are made, such as a loan to an attorney-in-fact that a reasonable person would not have made, the court may remove the attorney-in-fact and appoint the successor attorney-in-fact or a conservator. This is more likely when the principal is incapacitated and cannot execute a new document.
Request for an accounting
If the potential client does not have concrete evidence of abuse, a request for an accounting may be advisable. Under Minn. Stat. § 523.26, any interested party may request an accounting from a principal’s attorney-in-fact. This requires a demand for accounting from the attorney-in-fact. If the attorney-in-fact refuses to provide an accounting, the person demanding the accounting may request the court to order the attorney-in-fact to provide an accounting. In practice, this remedy usually works best when the principal has some level of incapacity. If the principal does not want the attorney-in-fact to provide the interested party with an accounting, the court may defer to the principal and not order an accounting. If the interested party can show that the principal has some level of incapacity, the court may be more likely to grant their request than if the principal is not incapacitated because individuals have the right of privacy regarding their finances. This remedy is somewhat limited because once the accounting has been obtained, if there are abuses, additional steps have to be taken, such as suing the attorney-in-fact for theft or vulnerable exploitation, or filing for conservatorship of the principal.
If there were abuses of the power of attorney form, the principal would have civil remedies to sue the attorney-in-fact. Certain interested parties would also have standing; namely if they were a court appointed fiduciary for the principal or the principal is deceased and the heirs are the interested parties. The attorney-in-fact can be sued for vulnerable exploitation of a financial adult, theft, or misappropriation, among others. It is important to note that if the principal is not legally incapacitated and does not want to purse a civil case, the interested parties may be limited in their ability to pursue civil remedies.
These types of cases usually involve significant legal fees. In some cases, legal fees can be recovered, but many times, they are not recovered because the attorney-in-fact may have already dissipated the funds or cannot repay anything to the principal or the persons pursuing the case. In some cases, the attorney fees may be recovered from the principal’s funds. Significant cost benefit analysis goes into these types of cases because the attorney-in-fact can also use the principal’s funds (in some cases) to retain an attorney and defend against the lawsuit.
If you believe that you or someone you know has been taken advantage of by their attorney-in-fact, please contact our office to discuss your case. If you have been acting as an attorney-in-fact for someone and you have been accused of wrongdoing in a civil proceeding, please contact our office. We do not handle criminal law matters; if you need a referral for a criminal proceeding, we can provide referrals.