Power of Attorney Litigation and Incapacity
Perhaps the most difficult issue that arises in power of attorney litigation relates to a determination of the onset of incapacity and the varying degrees of incapacity. These issues have a direct bearing on the nature of the fiduciary obligation of the attorney.
Under the Substitute Decisions Act, an attorney has a higher duty of care (a) if the grantor is incapable of managing property; or (b) if the attorney has reasonable grounds to believe that the grantor is incapable of managing property.
The reality is that there is often no clear determination made that the grantor is incapable. All too often, the Court is left trying to make that determination a considerable period of time after the fact.
When the grantor is capable to manage her property, it is only to the grantor that the attorney is accountable. Put another way, the principal provides authority to the agent to act on his behalf. It therefore follows that if the principal (grantor) was capable at all relevant times, the agent (attorney) will be well-positioned to argue that he should not now be accountable to others: If the grantor did not raise any concerns about his agents actions, they must have been made with the grantor’s consent!
The difficulty, of course lies with the question of proof. The grantor, now being incapable or deceased, is unable to provide any insight as to the nature of the authority that was given to the attorney as his agent. On the other hand, the attorney/agent is typically under an evidentiary burden of corroborating his position that the grantor had authorized his actions. This burden is enhanced when the financial decisions made were, by all appearances, imprudent or not in the apparent best interests of the grantor.
Have a great day, David
