Until the development of the durable power of attorney, expensive, time-consuming, and intrusive guardianship proceedings would be necessary in the event of incapacitation. The power of attorney, however, is an inexpensive, swift, and far-less intrusive mechanism to address incapacity or unavailability – with a properly drafted and executed power of attorney, guardianship or conservatorship actions can be avoided. Accordingly, the durable power of attorney has become an indispensable piece of every estate plan.
As set forth in New Jersey’s Revised Durable Power of Attorney Act, a “power of attorney” is a written document in which a principal authorizes an agent to act on his or her behalf. The “principal” is the person executing the power of attorney, while the “agent,” (also referred to as the “attorney,” “attorney-in-fact,” or “deputy”) in the power of attorney refers to the person authorized to act for the principal. Generally, a power of attorney allows the agent to “step into the shoes” of the principal and conduct necessary business on the principal’s behalf including, but not limited to, banking transactions, transfer of real estate, transfer of motor vehicles, and the preparation, execution, and filing of tax returns. It is important to note that the agent has a fiduciary duty to the principal to act within the powers delegated by the power of attorney and solely for the benefit of the principal.
There are several different types of powers of attorney, the most common being the “durable” power of attorney. A “durable power of attorney” is a power of attorney which contains the words “this power of attorney shall not be affected by subsequent disability or incapacity of the principal, or lapse of time,” or “this power of attorney shall become effective upon the disability or incapacity of the principal,” or similar words to reflect the principal’s intent that the agent’s authority will survive the disability or incapacity of the principal.
Unfortunately, disputes regarding powers of attorney are very common in New Jersey estate litigation. A power of attorney dispute can arise under 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.
Among the most common disputes with respect to powers of attorney involve unauthorized compensation or “self-gifting” by the agent from the principal’s assets. Although an agent under a power of attorney may be entitled to compensation for his or her services on behalf of the principal, he or she cannot transfer assets or modify the beneficiary of an account or policy without proper authorization. Pursuant to statute, an attorney-in-fact must be expressly and specifically authorized to make gifts or change beneficiary designations of the principal. 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 litigation and Will contests require specialized knowledge, you may wish to consult with an experienced attorney if you have questions regarding your or your loved one’s Power of Attorney, a loved one’s or your own Last Will and Testament, suspicions of undue influence, the probate process, administration of an estate or trust, the elective share of a surviving spouse, 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. – 2017 – All Rights Reserved
Timothy J. Little, P.C. is a full-service law firm with offices in Woodbridge and Chesterfield, New Jersey. Timothy J. Little, P.C. represents clients throughout New Jersey including Middlesex County (Old Bridge, Woodbridge, Sayreville, East Brunswick, Spotswood, Perth Amboy, Dunellen, Colonia, Sewaren, Iselin, Avenel, Fords, Keasbey, Menlo Park, Port Reading, South Amboy, Monroe Township, Edison, Carteret, Cranbury, Helmetta, South River, Milltown, Highland Park, Jamesburg, Laurence Harbor), Monmouth County (Aberdeen, Matawan, Hazlet, Holmdel, Cliffwood Beach, Keyport, Keansburg, Middletown, Lincroft, Manalapan, Englishtown, Marlboro, Freehold, Colts Neck, Rumson), Union County (Rahway, Elizabeth), Ocean County (Jackson, Brick, Point Pleasant, Toms River), Somerset County, and Burlington County (Chesterfield).
Probate / Estate Practice Areas: Drafting of Wills and Trusts, appointment and removal of fiduciaries, probate procedures, intestacy, fiduciary duties and obligations, fiduciary accountings and exceptions, fiduciary compensation, marshaling of assets, insolvency petitions, will contests and disputes, caveats, the elective share, undue influence claims, Power of Attorney abuse and inter vivos gift disputes, ejectment and eviction from estate or trust property, Refunding Bonds and Releases, New Jersey Transfer Inheritance Tax (IT-R), New Jersey Estate Tax (IT-Estate)