Power Of Attorney Problems---Who Has The Right To Try And Fix Them?
/I have previously written about powers of attorney, which can be great estate planning tools in the right hands and terrible estate planning hands in the wrong hands ("licenses to steal").
In other words, powers of attorney can be very useful for assisting persons with making financial and health care related decisions. On the other hand, if the "agent" ends up taking advantage of the "principal" by carrying out acts which are not in the principal's interest (and which, for example, are instead in the agent's interest), the principal can be financially devastated (e.g., the agent could clean out the agent's bank account or sell their real estate, etc.) or their health can be prejudiced (e.g., the agent could withhold treatment, etc.).
Sometimes people other than the principal (perhaps the principal is incapacitated or deceased) want to challenge the agent's actions, and a question of "legal standing" is raised. Put another way, there is occasionally an issue regarding who if anyone besides the principal has the right to challenge certain conduct carried out pursuant to a power of attorney.
In Arkansas that question is often answered by Ark. Code Ann. Sec. 28-68-116, which is the "Judicial Relief" section of the Uniform Power Of Attorney Act codified at Ark. Code Ann. Sec. 28-68-101, et seq. The Uniform Law Comment to Ark. Code Ann. Sec. 28-68-116 states that "[t]he primary purpose of this section is to protect vulnerable or incapacitated principals against financial abuse."
The statute says that:
(a) The following persons may petition a court to construe a power of attorney or review the agent's conduct, and grant appropriate relief:
(1) the principal or the agent;
(2) a guardian, conservator, or other fiduciary acting for the principal;
(3) a person authorized to make health-care decisions for the principal;
(4) the principal's spouse, parent, or descendant;
(5) an individual who would qualify as a presumptive heir of the principal;
(6) a person named as a beneficiary to receive any property, benefit, or contractual right on the principal's death or as a beneficiary of a trust created by or for the principal that has a financial interest in the principal's estate;
(7) a governmental agency having regulatory authority to protect the welfare of the principal;
(8) the principal's caregiver or another person that demonstrates sufficient interest in the principal's welfare; and
(9) a person asked to accept the power of attorney.
(b) Upon motion by the principal, the court shall dismiss a petition filed under this section, unless the court finds that the principal lacks capacity to revoke the agent's authority or the power of attorney.
As one can see, a wide variety of individuals has the power to challenge actions taken under a power of attorney. The Uniform Law Comment to this statute says that such "broad categories" serve the purpose of "[a]llowing any person with sufficient interest to petition the court" and this "is the approach taken by the majority of states that have standing provisions."
I have represented (1) power of attorney agents, (2) power of attorney principals, and (3) family members and friends of power of attorney principals. For the first group, this statute is a good reminder that they need to be careful acting under a power of attorney because any number of people have legal standing to challenge their conduct. For the second and third groups, this statute allows for a wide array of persons to contest agent behavior which they perceive to be unfair to or indicative of exploitation of a principal.
Matt House can be contacted by telephone at 501-372-6555, by e-mail at mhouse@jamesandhouse.com, by facsimile at 501-372-6333, or by regular mail at James, House & Downing, P.A., Post Office Box 3585, Little Rock, Arkansas 72203.