In a prior blog post, I discussed the duties of an agent under a power of attorney. In this blog post, I discuss the remedies that people have against an agent under a power of attorney when the agent commits misconduct.
The first issue is who has standing to pursue legal action against an agent under a power of attorney? Virginia has adopted a modified version of the Uniform Power of Attorney Act that spells out the categories of people who can seek judicial relief against an agent. Under Virginia Code Section 64.2-1614, the following are some of the parties who have a right to file suit against an agent under a power of attorney:
- the principal (the person granting authority under the power of attorney);
- a guardian, conservator, personal representative of the estate of a decreased principal, or other fiduciary acting for the principal;
- a person authorized to make health care decisions for the principal;
- the principal’s spouse, parent, descendant, and adult brother, sister, niece or nephew;
- a person named as a beneficiary to receive any property on the principal’s death (including as a beneficiary of a trust created by or for the principal);
- and the principal’s caregiver or another person that demonstrates sufficient interest in the principal’s welfare.
This is an expansive list of parties. Notably, the array of family members is quite broad, which helps ensure that even if some family members may be sympathetic to (or indifferent to) an unethical agent, there will hopefully be at least one other family member who is sufficiently concerned to seek judicial recourse.
Also, Virginia law provides beneficiaries of the principal’s estate with standing to seek to hold the agent accountable. This is very important for beneficiaries, as it is somewhat common for beneficiaries to find that unethical agents under a power of attorney have also managed to engineer being named as executor in the principal’s will, and as trustee of the principal’s trust. In the event that the agent misused the principal’s finances while the principal was alive (such as diverting assets to himself through outright theft or via a questionable use of a gifting power in a power of attorney), that same agent, in his roles of executor and trustee, will not take any action after the testator’s death to seek to hold himself (in his capacity as agent) accountable for such improprieties (as an independent executor may once the executor has uncovered the improprieties committed by the agent). Accordingly, beneficiaries of the principal’s estate who find out, after the principal died, that the agent under the principal’s power of attorney misused the principal’s funds while the principal was alive, should seriously consider filing suit against the agent, since the misconduct will have diminished the principal’s estate, thereby reducing the share of the estate that the beneficiaries will receive.
There are numerous remedies that people have against an agent under a power of attorney when the agent commits misconduct. First, the person can petition the court to order the agent to provide an accounting of all transactions that the agent has made or permitted to occur on behalf of the principal. Given the rise of the utilization of trusts as an estate planning device, principals will often have assets titled in a trust, so the person seeking the accounting of the agent should also issue a request for a report relating to all assets titled in the name of the trust too (assuming that the agent is also the trustee). Note that this can get tricky, as the class of people who have standing to seek judicial relief against an agent under the Virginia Uniform Power of Attorney Act is greater than those that have the statutory right to seek information regarding a trust under the Virginia Uniform Trust Code.
Second, the person can petition the court to terminate, suspend, or limit the authority of the agent under the power of attorney (or revoke the power of attorney in its entirety). If an agent under a power of attorney is removed by the court, the successor agent named in the power of attorney will usually serve in place of the removed agent. If there is no successor named (or if the successor agents are too closely tied to the acting agent, such that a request will be made to the court to also prevent the successor agents from serving), the petition will usually be made in conjunction with a request for the appointment of a guardian and conservator for the principal.
Third, the person can petition the court to hold the agent liable for breach of duty, which can take the form of seeking a judgment against the agent for the monetary value by which the agent diminished the estate of the principal (thereby financially harming the person seeking the relief), or seeking the recovery of particular assets that the agent improperly converted, disbursed, or sold for below-market value. Notably, the Virginia Uniform Power of Attorney Act permits a person seeking relief to also seek relief against a “transferee” from an agent (in other words, someone to whom an agent improperly transferred an asset). That’s a powerful remedy for a wronged party, especially in an instance where the agent is judgment-proof (in other words, where it would be effectively impossible to collect on a judgment against an agent).