The transfer of wealth from the elderly has become the subject of heightened judicial scrutiny over the last several years, and this trend will only grow with the aging of the population. Part of the issues faced by courts surround the use of a power of attorney and the potential for abuse of that power. A power of attorney grants legal authority to an agent to make decisions on behalf of the principal. A power of attorney is usually general in scope but of course can be limited in its application. It can be made effective immediately or upon one’s disability.
It is not uncommon for heirs to question the use of a power of attorney after the death of the principal, as there exists the opportunity for fraud and abuse of the power. An agent should ensure that when a power of attorney is used to benefit that agent or someone in his or her family, that sufficient evidence is available to establish the propriety of the transaction in order to fend off potential suit by heirs. In a recent New Jersey case, the Appellate Division upheld the trial Court’s decision setting aside a beneficiary designation which named the agent’s wife because the agent was simply unable to prove that the principal, who was elderly and relied on the agent for banking and other decisions, actually approved the transaction. (In the Matter of the Estate of William J. Mallas, Deceased (DOCKET NO. A-5593-15T3)). While the Court agreed that the Will and Codicil which partially benefited the agent reflected the principal’s intentions, the agent was unable to produce any credible testimony or other evidence to support the change of beneficiary of the annuity. Noticeably absent from the agent’s case was evidence of contemporaneous notes from the principal, testimony to support the principal’s knowledge of the change and his intentions, and other designations made by the principal which were consistent with the change. Without proper evidence, or the actual change being made by the principal himself, an agent/beneficiary faces an uphill battle in proving the legitimacy of the change in beneficiary.
Proper planning in these contexts will ensure that the principal’s intentions are carried out and will avoid the potential for abuse. If foul play is suspected, an action may be brought against the agent seeking full disclosure of his or handling of the principal’s assets. Before doing so, one should consult with an attorney who is familiar with these types of actions to determine the viability of making such a claim.