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, that adequate records are kept in order to fend off potential suit by heirs.  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.

Recent Cases:

Attorney in Fact Responsible for Payment of Nursing Home Costs as Responsible Party

Royal Suites Healthcare and Rehabilitation Center v. Estate of Dora Palladino, Theodore Fusco and Rita Fusco, 2012 N.J. Super. Unpub. ____ (Docket No.: A-1711-09T1) (App. Div. 2012). On appeal from the Superior Court of New Jersey, Law Division, Special Civil Part, Atlantic County. Before Judges Fuentes, Graves and Koblitz.

Defendants, Theodore and Rita Fusco appeal from a judgment entered against them for an unpaid nursing home bill of their deceased aunt, Dora Palladino (“Palladino), along with costs of suit, in favor of Royal Suites Healthcare and Rehabilitation Center (“Royal Suites”). On March 10, 2008, Mr. Fusco signed an agreement to admit Palladino to Royal Suites, a residential nursing home facility. At the time of admission, Palladino was suffering from dementia and medical problems. Mr. Fusco signed the admission agreement on the line “Signature of Responsible Party”, and wrote “P.O.A.”, meaning Power of Attorney, after his signature.

The admission agreement at Royal Suites stated that a Responsible Party who signs for a Resident pursuant to a Power of Attorney must provide a copy of the Power of Attorney at the time of admission, and takes on the primary obligation of payment out of the resident’s funds or otherwise, and upon failure to pay, becomes a personal guarantor for payment.

On May 14, 2008, Medicare benefits were exhausted. At that time, Palladino had the choice to stay at Royal Suites or to leave, and she chose to stay. On June 3, 2008, Royal Suites sent Mr. Fusco a thirty day discharge notice which stated that he had not paid or come to any arrangements regarding payment, and that he must contact Royal Suites or they will no longer provide services to Palladino. Palladino was discharged to home on June 13, 2008. At that time, Palladino owed a balance of $7,755 to Royal Suites.

From January 2008 until Palladino’s death in August 2008, she received four checks totaling $160,418.52. The checks were deposited into joint accounts held by Palladino and the Fuscos or into the Fuscos’ individual names.

At trial, the Court noted that a Power of Attorney was never produced, not was a copy of Palladino’s Will admitted to probate. Without the Power of Attorney or Will, the Court held that Mr. Fusco, by signing the agreement, was acting on his own and not as agent on behalf of Palladino or her estate. Thus, the Court found the Fuscos liable for payment of the debt. The Court also reduced the legal fee request of Plaintiff’s counsel, which was not appealed.

On appeal, the Appellate Court cited Mr. Fusco’s handling of Palladino’s finances and the fact that Mr. Fusco acknowledged that over $160,000 in Palladino’s funds were deposited into accounts accessible to the Fuscos. Now that Palladino is deceased, the Fuscos do not believe they are obligated to pay her debts. In light of the contract with Royal Suites signed by Mr. Fusco wherein he agreed to be responsible for Palladino’s debts, coupled with the fact that a significant amount of Palladino’s monies were accessible by both defendants, the judgment against them is affirmed.

Revocation of Trust on Grantor’s Behalf Allowed Under the Terms of the Power of Attorney

In the Matter of the Revocable Trust u/a dated June 30, 1995 established by Mildred Quick Muller, 2012 N.J. Super. Unpub. ____ (Docket No.: ESX-CP-0299-2011) (Ch. Div. 2012).

Pursuant to the terms of an executed Power of Attorney, Grantor’s attorney in fact sought to transfer assets held by her revocable trust into a new revocable trust established by Grantor. The acting trustee of the prior revocable trust, JP Morgan Chase bank, refused to transfer the assets, and suit was filed by Grantor’s attorney in fact seeking directions from the Court as to whether he had the requisite authority to transfer the assets to the new trust as agent under the Power of Attorney.

Grantor established a revocable trust for her own benefit in 1995, and said trust was restated in 1998 (the “1998 Trust”). The 1998 Trust named Grantor’s attorney and JP Morgan Chase bank as Co-Trustees and allowed the Co-Trustees to distribute the entire trust corpus to grantor. Grantor also reserved the right to revoke the trust. Her Will, signed in 2004, provided that her assets would be distributed to various charities and to her nieces and nephews.

In 2010, Grantor signed a new Will and trust (the “2010 Trust”), naming her nephew, Mr. Niemann, as Executor and Trustee. Grantor also signed a Power of Attorney naming Mr. Niemann as her attorney in fact. Mr. Niemann then asked JP Morgan Chase, the Trustee under the 1998 Trust, to transfer the Grantor’s assets to the 2010 trust, and the bank refused. Suit was then filed.

The Court reasoned that the terms of the 1998 Trust and the Power of Attorney granted Mr. Niemann the requisite authority to transfer the assets to the 2010 Trust. Article 1 of the 1998 trust allowed the trustee’s to exhaust the corpus for Grantor’s benefit. Paragraph 19 of the Power of Attorney granted Mr. Niemann, as agent, the power to take any action that the Grantor may take and exercise “full and complete power and discretion” in the same manner as Grantor. Paragraph 17 of the Power of Attorney allows Mr. Niemann the power to transfer Grantor’s property into a trust of which Grantor was a beneficiary. Therefore, Mr. Niemann had the requisite authority to withdraw assets of the 1998 trust “even to the point of completely exhausting corpus”, and transfer them to the 2010 Trust.

The authority conferred upon Mr. Niemann by the Power of Attorney therefore afforded him the right to make the transfer to the new Trust.

Undue Influence and Breach of Fiduciary Duty Committed by Attorney in Fact

Thurman E. King v. Terri E. Johnson, 2012 N.J. Super. Unpub. ____ (Docket No.: A-4357-09T3) (App. Div. 2012). On appeal from the Superior Court of New Jersey, Law Division, Camden County. Before Judges Grall and Alvarez.

Defendant appeals from a judgment against her which was entered by the trial Court after a jury trial finding that she breached her fiduciary duty and committed undue influence through a Power of Attorney given to her by her father, the Plaintiff herein.

When Plaintiff was 57 years old, he had a stroke leaving him paralyzed on his left side. His daughter, the Defendant herein, was living in Maryland at the time. She left her job and moved in with Plaintiff to care for him. Defendant was given a Power of Attorney and access to Plaintiff’s bank accounts and his 401(k), which she used to purchase a residence for her and the Plaintiff, paid for certain repairs to the residence, purchased a car, in part, with Plaintiff’s funds, and paid for some of Defendant’s personal expenses and for some trips taken with Plaintiff.

Plaintiff commenced this litigation through his attorney in fact, Barbara Johnson. In his complaint, Plaintiff charged Defendant with conversion, breach of fiduciary duty, undue influence, and he sought an accounting and sole title to their residence. After a jury trial, the Court found that there was insufficient evidence to support the claim that Defendant received her interest in the residence through deception and undue influence, and dismissed that claim. The Court left to the jury the issue of breach of fiduciary duty and undue influence on the remaining transfers. The jury found that Defendant had committed undue influence and breach of fiduciary duty and ordered her to pay Plaintiff $114,000 as reasonable compensation for his loss.

On appeal, the Appellate Court affirmed the decision, finding that Defendant’s appeal was procedurally defective as she did not seek a new trial at the conclusion of the jury trial before filing her appeal, which is required under Rule 2:10-1. In addition, the Appellate Division noted that the evidence adduced at trial was sufficient to support the jury verdict.

Gift by Power of Attorney

Wolpin v. Wolpin, 2010 N.J. Super. Unpub. LEXIS 608 (Docket No.: A-1399-08T2)  (App. Div. 2010).  On appeal from the Superior Court of New Jersey, Chancery Division, Monmouth County.  Before Judges Rodriguez, Reisner and Chambers.

In this matter, the court set aside a Deed transfer made by Decedent’s wife to herself by power of attorney.  The court held that Decedent’s second wife lacked the requisite authority to convey the condominium to herself as the power of attorney did not contain any language authorizing a transfer of Decedent’s assets to herself.  Under NJ common law in effect at the time, one holding a power of attorney could not give away the assets of a principal unless the power of attorney contained very clear language permitting such action.  (Note:  this was subsequently codified in N.J.S. 46:2B-8.13a).

This litigation is between Decedent’s second wife and the children of his first wife over the right to proceeds of sale of a condominium owned by the Decedent.

In 1984, Decedent purchased a condominium in Long Branch, New Jersey for $206,800.  At the time, he was married to his second wife.  At the time of purchase, Decedent gave his two sons a mortgage in the amount of $180,000 on the condominium.  This did not represent any underlying debt owed to the sons.  One son testified that Decedent wanted the mortgage to act as a gift to his children and grandchildren at his death.  The mortgage was recorded and remained of record at Decedent’s death.

In 1987, Decedent prepared and executed a Deed granting the condominium to his sons together with use of a cabana, retaining a life estate for himself and providing that the conveyance did not merge with any mortgage.  He gave the original Deed to his sons, telling them not to act on it unless he was terminally ill.  The Deed was never recorded.

Thereafter, in 1988, Decedent executed a number of wills leaving the condominium to his second wife.  He executed another will leaving her a life estate in the condominium, stating that the prior will was the product of undue influence exerted over him by his wife.  He executed a third will leaving his wife the minimum required by law.

In 1994, as a result of a fall, Decedent gave his wife power of attorney.  She immediately had a Deed prepared conveying the condominium to herself.  Thereafter, Decedent executed a series of wills prepared by his wife’s attorney ratifying the Deed to his wife.

In 1995, Decedent wrote a letter stating that his wife was liquidating his assets and giving them to her daughter, but he needed her, and that any wills after 1995 were the product of undue influence.  In 1997, Decedent conveyed the cabana to his wife.

In 2006, after Decedent’s death, his wife sold the condominium.  She then learned of the recorded mortgage and commenced a declaratory judgment action seeking to invalidate the mortgage.  Decedent’s sons counterclaimed, seeking to enforce the 1984 mortgage and 1987 deed.

The trial court found that the 1984 mortgage was a valid inter vivos gift, as donative intent was not in dispute, and Decedent recorded the mortgage himself.

The trial court also held that the 1987 deed was not a valid inter vivos gift as Decedent’s failure to record same was evidence of his lack of donative intent and evidence of his failure to relinquish dominion and control.  Also, Decedent told his sons to hold the Deed until he became terminally ill.

The trial court upheld the 1994 Deed transfer.  The appellate court reversed, as same was executed by Decedent’s second wife pursuant to a power of attorney.  The power of attorney did not give her the right to convey the property to herself, and therefore should be set aside.  The appellate court also found that the trial court’s reliance on subsequent wills which were likely the product of undue influence was misplaced, as no determination of there validity had ever been made.