Heir Sues Agent For Adding Beneficiaries To Bank Accounts

JULY 23, 2001 VOLUME 9, NUMBER 4

Fae Powell had given her nephew Jackie Powell a power of attorney so that he could handle her financial affairs. Mr. Powell used that power of attorney to change over $600,000 worth of bank CDs into “payable on death” status, naming himself and other nephews and nieces as beneficiaries. Ms. Powell’s will, however, left her estate to her sister and others. Did Mr. Powell have the authority to make those changes in his aunt’s estate plan?

The question posed to the Nebraska courts was actually more complicated than that. In most states it is clear that a power of attorney does not give the agent (sometimes also referred to as the “attorney-in-fact”) authority to make gifts unless there is a specific provision in the document. But is changing accounts so that they pass automatically on death to someone else really a gift? After all, no transfer would occur until after Ms. Powell’s death, so it could be argued that her agent had made no gifts.

Ms. Powell’s situation was further complicated by her nephew’s insistence that she had specifically instructed him to make each change, and that he was simply signing her name to actions she was really directing herself. Of course, it would be difficult for him to prove that she gave him such instructions, unless she did so in the presence of neutral observers.

Ms. Powell’s sister Eleine Hampshire did not believe that Mr. Powell was carrying out the decedent’s instructions. She pointed out that if the changes had not been made she would have inherited nearly $80,000 from Ms. Powell’s estate, and so she sued Mr. Powell for fraud.

The Nebraska Court of Appeals threw Ms. Hampshire’s case out of court. The justices decided that the action should have been brought by Ms. Powell’s estate against her attorney-in-fact, and that Ms. Hampshire could not sue directly for the loss to the estate. Never mind that Mr. Powell was named as personal representative of the estate—that problem would have to be solved by someone seeking to disqualify him from serving in the probate court. Ms. Hampshire had simply filed her lawsuit improperly. Hampshire v. Powell, May 8, 2001.

The Nebraska court’s decision, based as it is on procedural grounds, fails to answer the underlying question: does an agent under a power of attorney have the authority to change beneficiary designations on accounts, life insurance and the like? Other cases have decided the question differently, depending on the individual facts in each instance. It would certainly be better to have the change in beneficiary designations signed by the individual herself, rather than by the agent. In Arizona the law is a little clearer: unless the power of attorney gives express authority to make such changes (and the authority is separately initialed on the form), they are probably invalid.

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