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Friday November 4, 2016

posted by Thomas J. Banaszynski
Tags: In the news 

A power of attorney (POA) is a written authorization to represent or act on another’s behalf in private affairs, business, or some other legal matters.

The one authorized to act is the agent or the attorney-in-fact.

The principal or grantor or settlor determines the amount of power given to the attorney-in-fact, and this individual can be given the authority to deal with only one particular issue (a specific power of attorney), or to handle most of the principal’s personal and financial matters (a general power of attorney). Regardless of the type of power of attorney granted, the attorney-in-fact also is responsible for distinguishing between the types of decisions he or she has the power to make and other decisions.

There are multiple types of decisions that the attorney-in-fact can be given the power to make, including the power to:

• Make financial decisions

• Make gifts of money

• Make health care decisions, including the ability to consent to giving, withholding, or stopping medical treatments, services, or diagnostic procedures. (Note: your loved one can also make a separate “health care power of attorney” to give only this power to an individual.)

• Recommend a guardian

Capacity of the Grantor: The person who creates a power of attorney, the grantor, can only do so when he/she has the requisite mental capacity. Suppose the grantor loses capacity to grant permission after the power of attorney has been created (for example, from Alzheimer’s disease or a head injury in a car crash); then the power will probably no longer be effective. In some powers of attorney the grantor states that he/she wishes the document to remain in effect even after he/she becomes incapacitated. This type of power is commonly referred to as a durable power of attorney. If someone is already incapacitated, it is not possible for that person to execute a valid power. If a person does not have the capacity to execute a power of attorney (and does not already have a durable power in place), often the only way for another party to act on their behalf is to have a court impost a conservatorship or a guardianship.

Execution: In order for a power of attorney to be a legal document it must be signed and dated at a minimum by the principal. Having the document reviewed and signed (and often stamped) by a notary public increases the likelihood of withstanding a challenge to its validity.

Recently the Kentucky Supreme Court was confronted with some peculiar issues regarding powers of attorney and the power granted to an attorney-in-fact.

In Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky. 2012), the Kentucky Supreme Court was asked to address the issue of whether a power of attorney could authorize, or permit, arbitration related to a wrongful death claim to be brought on behalf of the estate of the grantor of the Power of Attorney. The court determined it could not. Specifically, the court noted that, as in the case with Phyllis Krebs, the “power of attorney relates expressly and primarily to the management of her property and financial affairs and to assuring that health-care decisions could be made on her behalf.” 376 S.W.3d at 592. The court went on to note that an attorney-in-fact or agent, be authorized to take all the steps necessary to effectuate the management of the grantor’s property and financial affairs, and to make appropriate health care decisions. See also, Extendicare Homes, Inc. v. Whisman, 478 S.W.3d 306 (Ky. 2015).

The Ping court noted that “we have indicated that an agent’s authority under a Power of Attorney is to be construed with reference to the types of transactions expressly authorized in the document and subject always to the agent’s duty to act with the ‘utmost good faith,’” citing Wabner v. Black, 7 S.W.3d 379, 381 (Ky. 1999).

A similar issue confronted the Kentucky Supreme Court in the matter of Extendicare Homes, Inc. v. Whisman, 478 S.W.3d 306 (Ky. 2015) was confronted with the situation of whether an attorney-in-fact could agree to, or be compelled to, arbitrate the claims of a decedent. The Supreme Court in a four to three decision held that the powers vested in the attorneys-in-fact did not encompass the power to enter into arbitration agreements regarding the claims of their decedents.

The opinion of the Supreme Court is summarized as follows:

“Overview HOLDINGS: [1]-The trial court properly denied the nursing homes’ Ky. R. Civ. P. 60.02 motions because, while arbitration was not only sanctioned, but indeed promoted, by the Ky. Const. § 250, the arbitration agreements at issue were never validly formed where the powers vested in the attorneys-in-fact did not encompass the power to enter into an arbitration agreements regarding the claims of their decedents, the authority to waive the decedents’ constitutional rights in Ky. Const. §§ 7, 14, and 115 of access to the courts by court or jury and to appeal to a higher court were not explicitly set out in the power-of-attorney documents, and the attorneys-in-fact were not authorized to enter into arbitration agreements on behalf of the wrongful death beneficiaries under Ky. Rev. Stat. Ann. § 411.130(2).” Id., at 306.

The Supreme Court went on to discuss and expand its opinion in Ping v. Beverly Enterprises, Inc., 376 S.W.3d 581 (Ky. 2012) in explaining what powers may be granted and authorized in a power of attorney.

“At the outset, however, it is appropriate that we direct our attention specifically to the cause of action pled in each case for wrongful death. We held in Ping, and we reiterate today: the decedent whose death becomes the basis of a wrongful death claim had no authority during his lifetime, directly or through the actions of his attorney-in-fact, to prospectively bind the beneficiaries of the wrongful death claim to an arbitration agreement.” Id., at 313.

“In Ping, 376 S.W.3d at 597-600, we squarely confronted the question of whether a decedent, by her own action or through the action of her attorney-in-fact, could enter into contracts of any kind that would bind the rights of the beneficiaries of wrongful death claims made in connection with her own death. Based upon well-settled precedent and upon the constitutional and statutory structure of Kentucky’s wrongful death law, we determined that a wrongful death claim does not ‘derive from any claim on behalf of the decedent, and [the wrongful death beneficiaries] do not succeed to the decedent’s dispute resolution agreements.’ Id. at 600.” Id., at 313.

“In contrast with the wrongful death claims, the personal injury and statutory claims arising under KRS 216.510 et seq. belong to the decedents; and the respective estates succeeded to those claims, at least to the extent that such claims survive the decedent’s death pursuant to KRS 411.140 and 216.515(26).” Id., at 314.

“A person’s assent to a contractual agreement can be provided by an agent acting as an attorney-in-fact, if the authority to do so was duly conferred upon the attorney-in-fact by the power-of-attorney instrument. Conversely, if that authority was not so conferred by the principal, the requisite assent, of course, cannot be provided by the attorney-in-fact.” Id., at 321.

“Whether the principal’s assent to the arbitration agreement was obtained is, in each of the cases under review, a question of law that depends entirely upon the scope of authority set forth in the written power-of-attorney instrument. Ping, at 590. Ping further clarifies:

The scope of [the agent’s] authority is thus left to the principal to declare, and generally, that declaration must be express . . . [E]van a ‘comprehensive durable power would not be understood as implicitly authorizing all the decisions a guardian might make on behalf of a ward. Rather, we have indicated that an agent’s authority under a power of attorney is to be construed with reference to the types of transaction expressly authorized in the document and subject always to the agent’s duty to act with the ‘utmost good faith.’ Id., at 592. (citations omitted).” Id., at 321.

“Focusing even closer on the question of whether, by way of a durable power-of-attorney, a principal vested his agent (his attorney-in-fact) with the authority to select arbitration and its concomitant waiver of the constitutional right of access to the courts, Ping cites to Restatement (Third) of Agency § 2.02 comment h. (2006). We said that ‘a collateral agreement to waive the principal’s right to seek redress of grievances in a court of law’ was an act with significant legal consequences.’ We emphasized: ‘Absent authorization in the power of attorney to settle claims and disputes or some such express authorization addressing dispute resolution, authority to make such a waiver is not to be inferred lightly.’ Id. at 593.” Id., at 321-322.

“Ping faithfully applied the age-old principle that a power-of-attorney must be strictly construed in conformity with the principal’s purpose.” Id., at 322.

“We held in Ping that powers granted expressly in relation to the management of the principal’s property and financial affairs, and to health-care decisions, ‘did not give [the attorney-in-fact] a sort of universal authority beyond those express provisions.’ Id. at 592.

An interesting variant on the issue of whether a power of attorney can arbitrate the claims of the decedent is whether an attorney-in-fact might be authorized to amend or revoke a trust created by the grantor. The Uniform Trust Code (UTC) was passed into law by the Kentucky General Assembly in July, 2014, and may be found in KRS Chapter 386B. The UTC provides that if trust documents specifically provide, an attorney-in-fact may amend or revoke a trust. KRS 386B.6-020(5). It is important, however, that this power being granted to the attorney-in-fact should be specifically stated in both the trust agreement and the power of attorney document.

Powers of attorney can be valuable tools for estate planning. However, one must be careful in drafting the power of attorney and in specifically stating what powers are granted to the attorney-in-fact.