Archives: power of attorney

In Matter of Conklin, 2015 NY Slip Op 25094 (Sur Ct, Nassau County 2015), a contested accounting proceeding, the Nassau County Surrogate’s Court addressed, among other things, whether specifically bequeathed property sold by an attorney-in-fact prior to the decedent’s death, adeemed.  My article entitled Ademption and the Power of Attorney, published in the Fall 2009 New York State Bar Association Trusts & Estates Law Section Newsletter, contains a thorough discussion of the ademption doctrine in the context of conveyances by attorneys-in-fact.  While the article predated revisions to the General Obligations Law intended to curb abuses of power by attorneys-in-fact, this recent decision demonstrates that the law has not evolved significantly on the subject despite such changes.

As explained in my article,

Ademption is the ‘extinction or withholding of some legacy in consequence of some act of the testator which, though not directly a revocation of the bequest, is considered in law as equivalent thereto, or indicative of an intention to revoke.’ A bequest adeems when property that had been specifically devised no longer exists at the time of the testator’s death. (Jaclene D’Agostino, Ademption and the Power of Attorney, NYSBA Trusts & Estates Section Newsletter, at p.7, Vol. 42 [Fall 2009]).

In Conklin, one of the decedent’s two attorneys-in-fact, Lori Conklin (“Lori”) sold his cooperative apartment while he was residing in a nursing or rehabilitation facility. The decedent’s will had specifically devised the apartment to his two children and first wife, with a direction that it be sold after his death and the proceeds divided among the three of them. But a sale prior to death meant that the proceeds would become part of the decedent’s residuary estate, of which Lori’s mother and co-agent, Joan Conklin (“Joan”), was the sole beneficiary.

The attorney who prepared the power of attorney testified at the hearing.  He explained that Lori initially contacted him regarding preparing a power of attorney and doing Medicaid planning for the decedent. Lori and Joan had several meetings with the attorney on the subject– none of which included the decedent. The attorney advised them that the decedent should execute a new power of attorney because the old one (under which Lori and Joan had both been appointed) did not contain a major gifts rider. He further advised that the decedent’s apartment should be sold for purposes of Medicaid planning, and the proceeds thereof be deposited into an account in the decedent’s name.

The decedent executed the new power of attorney on March 24, 2010, at the nursing or rehabilitation facility where he resided.  It named Lori and Joan as co-agents, and contained a major gifts rider, authorizing the agents to make gifts to themselves or others in any amount (see GOL §5-1514).  The attorney met the decedent for the first time on that date, when he supervised the execution of the document. He testified that at that meeting, he discussed with the decedent his recommendation that the apartment be sold.

The attorneys-in-fact subsequently sold the apartment. On the date of the closing, the attorney contacted the decedent to ensure that he was still alive. The agents then deposited the $125,500 proceeds from the sale into an account in the decedent’s name. The decedent died approximately two weeks thereafter.

The proceeds benefitted Joan, as the residuary beneficiary of the estate. Mere days after the decedent’s death, Lori used her power of attorney to close the decedent’s account (a fact that raises its own issues), and utilized the proceeds to pay off Joan’s home equity loan.

Despite the fact that Joan ultimately benefitted from the sale, the court rejected the contention that there had been a breach of fiduciary duty by the attorneys-in-fact in selling the apartment and thus, that the proceeds of the sale should be returned to specific devisees. The court explained the general rule that if a specifically bequeathed item is sold, given away, lost or destroyed during a decedent’s lifetime, then the bequest generally fails, or adeems. “Moreover, ‘it matters not whether [the sale] came to pass because of an intentional or voluntary act of the testator’” (Matter of Conklin, supra at *5 [quoting Matter of Wright, 7 NY2d 365, 367 [1960]). In addition, “once the devise is found to be adeemed, the court is not permitted to substitute something else for it. This includes tracing the proceeds from the sale of the real property” (Matter of Conklin, supra at *6 [relying on Labella v Goodman,198 AD2d 332 [2d Dept 1993]; see also Matter of Wallace, 86 Misc 2d 175, 180 [Sur Ct, Cattaraugus County 1976] [opining proceeds of a sale of specifically bequeathed property “do not constitute the legacy bequeathed,” and thus, “the general rule of ademption applies and the legacy fails”]).

Given counsel’s advice to sell the apartment, and his contacting the decedent on the date of the closing, the court concluded that there had been no breach of fiduciary duty by the attorneys-in-fact, and thus, the foregoing general rules applied to this situation. Consequently, the specific devisees of the apartment were not entitled to the proceeds of the sale. The bequest had adeemed. Although this result might seem less than equitable on its face, it is in accordance with the laws of New York.

 Estate planning attorneys who prepare durable New York powers of attorney for their clients often counsel them to exercise care in allowing the use of such instruments because they grant the attorney-in-fact broad and sweeping authority. As a shorthand way of describing a power of attorney, an estate planner might tell a client that it allows the attorney-in-fact to do pretty much anything the client could do. The recent Appellate Division decision in Matter of Perosi v. LiGreci  illustrates the accuracy of this shorthand description. In that case, the court held that the authority granted to an attorney-in-fact under a New York statutory power of attorney includes the power to amend an irrevocable trust with the consent of the beneficiaries, pursuant to EPTL 7-1.9.

In 1991, Nicholas LiGreci created an irrevocable trust for the benefit of his three children, including his daughter Linda. Nicholas named his brother, John LiGreci, as the trustee. On April 20, 2010, Nicholas executed a durable New York statutory short-form power of attorney naming his daughter Linda as his attorney-in-fact. The power of attorney included authorization for “estate transactions,” as construed under GOL § 5-1502G and “all other matters,” as construed under GOL § 5-1502N. Nicholas also signed a major gifts rider. 

One month after the power of attorney was created, Linda, as attorney-in-fact for Nicholas LiGreci, executed an amendment to the irrevocable trust naming her son, Nicholas Perosi, as trustee instead of her uncle, John LiGreci. New York EPTL 7-1.9 allows the creator of a trust to “revoke or amend the whole or any part thereof” by an acknowledged instrument and with the written consent of all the trust beneficiaries. Pursuant to EPTL 7-1.9, each of the beneficiaries of the irrevocable trust consented to the amendment. John LiGreci did not consent to the amendment, nor was his consent required, as he was not a beneficiary.

Nicholas LiGreci passed away on June 3, 2010, never having personally signed the trust amendment. On July 28, 2010, Linda and her son, Nicholas Perosi, as the successor trustee, petitioned for an accounting from John LiGreci; for the removal of John LiGreci as trustee; and for turnover of the trust assets and records to Nicholas Perosi. John LiGreci moved to set aside the trust amendment, arguing that the trust was irrevocable and Linda did not have authority under the power of attorney to amend the trust. The Supreme Court agreed, holding that a power of attorney is a “forward looking” instrument and does not grant an attorney-in-fact authority to amend estate planning devices created prior to the execution of a power of attorney. The Supreme Court also found that the right to amend or revoke an irrevocable trust is a right that is personal to the creator and cannot be exercised by an agent unless the power of attorney expressly provides.

On appeal, the Appellate Division, Second Department, reversed (Matter of Perosi v. LiGreci, 2012 NY Slip Op 05533, decided July 11, 2012). Justice John Leventhal, in opinion joined by Justices Skelos, Balkin and Lott, explained that the irrevocable trust agreement did not specify any procedure by which the trust could be amended, and therefore EPTL 7-1.9 is applicable and allowed Nicholas LiGreci to amend the trust with the consent of the beneficiaries. Examining the power of attorney granted to Linda, the court quoted Zaubler v Picone, 100 AD2d 620, 621 (2d Dept 1984), in which it stated that “[a]n attorney in fact is essentially an alter ego of the principal and is authorized to act with respect to any and all matters on behalf of the principal with the exception of those acts which, by their nature, by public policy, or by contract require personal performance.” The court listed the “few exceptions” to the powers granted to an attorney-in-fact: the execution of a principal’s will, the execution of a principal’s affidavit upon personal knowledge, and the entrance into a principal’s marriage or divorce. Amending or revoking a trust with the consent of the beneficiaries, on the other hand, was not found to be an act which requires personal performance of a principal. The court, therefore, held that Linda, as attorney-in-fact and alter ego of Nicholas LiGreci, properly amended the irrevocable trust.

The court acknowledged that there may be policy considerations for prohibiting an attorney-in-fact from amending or revoking an irrevocable trust “based upon the premise that a creator knows what is best for his or her trust and overall estate plan.”  It concluded, however, that “such a policy is for the Legislature to enact, not the courts.”

 

Thanks in large part to the efforts of individuals and organizations advocating to curb the epidemic of financial abuse of the elderly, New York Governor, David Paterson, signed into law a broad transformation of Title 15 of the New York General Obligations Law pertaining to Powers of Attorney on January 27, 2009, apparently targeted directly at a reduction in “DPA” or “Durable Power of Attorney Abuse” in New York State.

This new legislation, which was unanimously approved on December 15, 2008 in the senate, is currently scheduled to take effect on March 1, 2009. However, in light of the drastic modifications which this new law portends, many in the legal community are clamoring for a six month reprieve in order to fully digest the implications of this sweeping change. In order to avoid the mass chaos that a retroactive repeal would bring, the new law mercifully provides that these changes do not affect the validity of any power of attorney executed prior to the effective date of this new law. Nevertheless, it is certainly advisable for estate planners and elder law attorneys to familiarize themselves with the new law and incorporate it in into their practice as soon as possible.  

 

 

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