By: Justin M. Smigelsky, Esq.
Unfortunately, disputes regarding powers of attorney are becoming more prevalent in New Jersey estate litigation. A power of attorney is a writing by which one person, the principal, appoints another as his agent, and confers upon that agent the authority to act in the principal’s place for the purposes set forth in the document.
In New Jersey estate litigation, a power of attorney dispute can arise in many circumstances including, but not limited to, when the agent uses the power of attorney document for his or her own benefit or other improper purpose, or when the authority itself is attacked based upon allegations of undue influence, duress, or lack of capacity. Oftentimes, a dispute regarding a power of attorney will involve allegations that the agent transferred assets or modified the beneficiary of an account or policy without authorization.
Under New Jersey law, powers of attorney are governed by the “Revised Durable Power of Attorney Act,” N.J.S.A. 46:2B-8.1, et seq. Pursuant to statute, an attorney-in-fact must be expressly and specifically authorized to make gifts or change beneficiary designations of the principal. Specifically, the statute states:
A power of attorney shall not be construed to authorize the attorney-in-fact to gratuitously transfer property of the principal to the attorney-in-fact or to others except to the extent that the power of attorney expressly and specifically so authorizes. An authorization in a power of attorney to generally perform all acts which the principal could perform if personally present and capable of acting, or words of like effect or meaning, is not an express or specific authorization to make gifts.
Under New Jersey common law in effect prior to the enactment of N.J.S.A. 46:2B-8.13a, an agent holding a power of attorney could not appropriate to himself or give away the assets of the principal unless the power of attorney contained very clear language permitting such action. See Manna v. Pirozzi, 44 N.J. Super. 227 (App. Div. 1957). Therefore, under the common law, if an agent conveyed assets without specific authorization in the power of attorney document to do so, same could constitute an illegal act and a breach of his fiduciary obligations.
In sum, unless the power of attorney document contains very clear enabling language, the agent is not permitted to give the principal’s assets to himself or to others. In fact, the principal, his heirs, or his representative, may compel the agent to provide an accounting of all financial transactions conducted by the agent during his tenure – as is often the case, this obligation to account may be enforced by the executor or administrator of the principal’s estate after the principal has passed away.
Because estate and trust administration and litigation requires specialized knowledge, you may wish to consult with an experienced attorney if you are either a fiduciary or beneficiary of an estate or trust. Specifically, you may wish to contact an attorney if you have questions regarding powers of attorney, the probate process, administration of an estate or trust, fiduciary obligations, preparation of a formal or informal accounting, refunding bonds and releases, and the procedures for filing a formal accounting or exceptions thereto. This article is for information purposes only, and is neither legal advice nor the creation of an attorney client relationship.
Justin M. Smigelsky, Esq. – Timothy J. Little, P.C. – 2016 – All Rights Reserved