A power of attorney is a legal document whereby a person, known as the “principal,” grants to another person, known as the “attorney-in-fact,” the authority to act on his or her behalf in certain financial matters. The attorney-in-fact is an agent and therefore owes a fiduciary duty to the principal. California law requires an attorney-in-fact to keep his or her personal property separate from any owned by the principal and managed by the attorney-in-fact. This is to prevent self-dealing, where an attorney-in-fact may attempt to enrich him- or herself at the expense of the principal.
As it is a binding legal document, it is always best to retain a qualified California estate planning lawyer to prepare a power of attorney. Although pre-printed power of attorney forms are widely available, they may offer insufficient protection for principals, especially when such documents are subjected to the laws of another state. A recent decision by an appeals court in the State of Washington, called upon to interpret a pre-printed power of attorney signed in California, illustrates the problems that may arise.
Boyd v. Pandera
Edith Clark had seven children, including daughters (and half-sisters) Mary Pandera and Ethel Boyd. In Clark’s declining years, she lived with Pandera. In 2000, they lived in Las Vegas, Nevada. In late 2001, Boyd and Pandera decided to move Clark into a nursing home near San Diego, California. The nursing home required Clark to sign a power of attorney designating an attorney-in-fact. Clark and her daughters obtained a pre-printed form from a local stationary store and executed it in the presence of a notary public. Clark named Pandera as her attorney-in-fact.
Clark only resided in the nursing home a few days before returning to live with Pandera in Nevada. The California power of attorney remained in effect. Two months later, the pair moved to Hawaii to live with Pandera’s son. While in Hawaii, Clark received an inheritance from her deceased brother’s estate. Pandera, exercising her power of attorney, used the money to purchase a house in Hawaii, which she titled in her name. She said this was to “repay” her for caring for her mother the past several years.
Pandera and Clark eventually moved back to the U.S. mainland and lived in a town just outside Spokane, Washington. It was there Clark died in 2009. She did not leave a will.
By this time, Pandera and her half-sister Boyd had been fighting over their mother’s care for some time. The probate court in Washington named Boyd executor of Clark’s estate. In that capacity, Boyd sued Pandera, claiming she improperly gave herself the Hawaii house in violation of Clark’s power of attorney. The probate court agreed with Boyd and ordered Pandera to pay damages to the estate.
But on July 24 of this year, the Washington Court of Appeals reversed that decision. The appeals court said Washington law, which applies in this case, does not require an attorney-in-fact to keep her property separate from that of the principal, nor does it prohibit the principal from making gifts to the attorney-in-fact. The language in the pre-printed power of attorney form Clark used was, as the appeals court saw it, merely a required notice stating California law on the subject: “The language was not an express provision and, thus, did not set the standard of fiduciary care in this case.”
Make Sure Your Estate Plan Is State-Appropriate
As this case demonstrates, probate laws vary from state to state. That is why it is never advisable to use a pre-printed form tailored to a single state’s laws. And if you have relocated to California from another state, that is why you should consult with a local estate planning lawyer who can ensure your power of attorney and other documents are properly updated to reflect this state’s laws. Contact the Law Office of Scott C. Soady in San Diego today if you have any questions.