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Saturday, July 31, 2010

Can an Attorney under a Power of Attorney sell an asset that is specifically left to someone in a Will?


An Attorney acting under an Enduring (Continuing) Power of Attorney has the responsibility of handling the legal and financial affairs for the person who named him or her as Attorney (the person giving the document is known as the donor). The Attorney must approach each and every transaction from the point of view of what is in the best interest of the donor.


Most Enduring Powers of Attorney give only general instructions for an Attorney. If the Attorney must sell some of the donor's assets so that the donor has something to live on, then the Attorney may choose which assets are to be sold, to whom they are to be sold, and at what price. The assets sold may or may not be mentioned in the donor's Will as being left to a specific beneficiary. The Attorney's responsibility is to the donor while the donor is alive, not to the person who might inherit the assets after the donor's death.


Having said that, an Attorney who knows the contents of the donor's Will should do his or her best to work with it, to avoid thwarting the donor's wishes. It would be in the donor's best interests for the Attorney not to mess up his or her plans.


Some Enduring Powers of Attorney contain specific instructions to avoid selling certain assets if at all possible. For example, if a donor has made a Will in which he leaves his lake cottage to his sister, the Enduring Power of Attorney could instruct the Attorney not to sell that lake cottage if there is anything else that could be sold instead. The Attorney must always follow directions in an Enduring Power of Attorney or risk personal liability.


This kind of specific direction is under-used, in my opinion. The only caveat I'd put on that is to suggest that the Enduring Power of Attorney should not have a direction not to sell the cottage under any circumstances. It would be better to phrase it as a direction not to sell the cottage except in dire financial need. That way, if the money from a sale of the cottage is the only money the donor has left and it is needed for living on, it can be used.


I've always been astonished by the number of people acting as Attorney who believe that their role is to do whatever they please with the donor's finances. I believe that people in general are becoming more aware of the limits of the Attorney's role, and it will eventually become harder for dishonest or misled Attorneys to continue to treat the donor's assets as their own. In the meantime, donors should take care to make the strongest document possible. This certainly does not mean a fill-in-the-blank document; it should be one that is personally tailored. Donors should consider putting in requirements for the Attorney to account periodically to other people in the family, or to advisors of the donor.


When the donor passes away, the authority of the Attorney ends. The Attorney must give the Executor of the estate a full financial accounting of everything he or she has done as Attorney. If an asset has been sold contrary to the instructions of the donor, this will be revealed to the executor.

5 comments:

  1. Can a beneficiary request this accounting, or is it only the executors?

    ReplyDelete
  2. The Attorney must account to the Executor, who becomes the legal representative of the estate as soon as the deceased passes away. It is because of that legal representation that the executor is entitled to the accounting. However, the executor in turn must account to the residuary beneficiaries for what he or she does with the estate, and that must include showing what assets and debts he or she started with. Note that only the RESIDUARY beneficiaries of the estate are entitle to an accounting from the executor.

    ReplyDelete
  3. I suppose if this person refuses to present accounting records to the executor, it would be very costly to pursue some type of action? Briefly, what would be the proper course of action to challenge this refusal, or if the records are not made available or are inadequate?
    Thank you for your help.

    ReplyDelete
  4. The executor has the right to insist on an accounting that satisfies him or her. If the executor has to hire legal help to enforce this, the executor's legal fees should be paid by the estate, not the executor personally. Unfortunately while this indemnifies the executor, it does eat up money that would otherwise go to the beneficiaries.

    ReplyDelete
  5. Does this all still apply in 2017 - I was told that I can sell the house with my POA and distribute the money from the house legally - is this now the case or is it as mentioned in this article

    ReplyDelete

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