Author: Alexander K. Cox
Originally published in October 2019
Copyright © 2019 Knox McLaughlin Gornall & Sennett, P.C.
For more information on Powers of Attorney, see related article: Durable Powers of Attorney: What They Are and Why All Clients Need Them
An agent must file an account of the agent’s administration whenever directed to do so by the court and may file an account at any time. This section does not mandate that the request for an accounting be initiated by a party with standing (In re Nadzam, 203 A.3d 215 [Pa. Super. Ct. 2019]). The court has statutory authority to independently order the agent to file an account (Reichle v. Liptak, No. 802 WDA 2015, 2016 Pa. Super. Unpub. LEXIS 3088, at *6 [Pa. Super. Ct. Aug. 24, 2016]).
The orphans’ court has power to direct the filing of an account as part of its oversight of decedents, estates, and fiduciaries. Upon request by the principal, a guardian, conservator, other fiduciary or by court order, the agent must disclose receipts disbursements or transactions conducted on behalf of the principal. The agent has 30 days to comply with the request or provide a writing substantiating the reason additional time is needed.
An aggrieved party may file a “Petition for Citation to Show Cause Why an Accounting Should Not Be Filed by the Agent of the Power of Attorney of (principal)” (Id). Each interested party identified in the petition may then respond by answering the petition, or filing preliminary objection. All responsive pleadings must be filed within 20 days of the date of notice or the date of the filing, whichever is later (Orphans’ Court Rules 3.6, 3.7). The petitioner must have standing and the petitioner must allege fraud or misrepresentation by the agent. The court is unlikely to burden an agent with the costs of an accounting merely because the petitioner wants to determine if any impropriety occurred. The petitioner must have cause to believe impropriety occurred.
An agent under power of attorney has a fiduciary duty to his principal. A fiduciary is required to use such common skill, prudence and caution as a prudent man, under similar circumstances, would exercise in connection with the management of his own estate, and may be surcharged for any losses to the estate resulting from his negligence (Estate of Lohm, 269 A.2d 451, 454 [Pa. 1970]). The objector has the initial burden of showing that the agent breached his fiduciary duty to the decedent/principal (Estate of Maurice, 249 A.2d 334, 336 [Pa. 1969]). If this burden is met, the burden shifts to the agent, who must show that the agent used due care when acting as an agent under the power of attorney (Id).
The deprivation of another’s right of property in, or use or possession of, a chattel, or other interference therewith, without the owner’s consent and without lawful justification (Stevenson v. Econ. Bank of Ambridge, 413 Pa. 442, 451 ). For the tort of conversion, the chattel must belong to the party that is injured by the conversion (Pearl Assurance Co. v. Nat’l Ins. Agency, Inc., 30 A.2d 333, 337 [Pa. Super. Ct. 1943]).
To state a claim for common law fraud, the plaintiff must show:
Agathos v. Starlite Motel, 60 F.3d 143, 147 (3d Cir. 1994)
For standing to exist, the underlying controversy must be real and concrete, such that the party initiating the legal action has, in fact, been “aggrieved.” A party is aggrieved when the party has a substantial, direct and immediate interest in the outcome of litigation. A party’s interest is substantial when it surpasses the interest of all citizens in procuring obedience to the law; it is direct when the asserted violations shares a causal connection with the alleged harm; finally, a party’s interest is immediate when the causal connection with the alleged harm is neither remote nor speculative.
The principal during their lifetime, or the principal’s estate after the principal is deceased has standing to sue an agent for breaching a fiduciary duty, acting outside the scope of the power of attorney, or for failing to act in accordance with the principal’s expectations or in the principal’s best interest. The representative of the principal’s estate has standing to challenge the agent’s actions.
Intended Beneficiaries – Agent’s inter vivos actions
Intended beneficiaries having standing to sue the agent of the principal’s power of attorney where the agent’s unilateral action was inconsistent with the principal’s known or probable intent. See Rellick-Smith v. Rellick, 147 A.3d 897, 903-04 (Pa. Super. Ct. 2016) (concluding that “as a beneficiary of the CDs named by the decedent/principal during her life, [the beneficiary] had standing to challenge the propriety of the Defendants’ unilateral action, as agents under the POA agreement, in changing the beneficiary designation, to the Defendants’ benefit”).
If, however, the beneficiary designation was made by the principal during the principal’s lifetime, ratified by the principal or with express approval, the beneficiary likely does not have standing (In re Nadzam, 203 A.3d 215 [Pa. Super. Ct. 2019]).
If the possibility that a person becoming a beneficiary appears to be remote, the person likely does not have standing to sue initially.
In In re Nadzam, prior to executing a power of attorney, the decedent changed his beneficiary for his retirement assets to his daughter, Ms. Burkett, transferred real property to Ms. Burkett, and held a joint bank account with Ms. Burkett. In October 2012, the decedent executed a power of attorney, naming Ms. Burket the agent, and in December 2012, decedent executed a will naming Ms. Burket the sole beneficiary. The decedent died on July1, 2017.
Ms. Burket’s sister, Ms. Domitrovich, petitioned the court to order an accounting to be filed, alleging that Ms. Burket unduly influenced the decedent to execute the 2012 will making herself the sole beneficiary. Ms. Domitrovich alleged that she was both a potential intestate heir of the decedent, and that the decedent had an earlier will naming her as a beneficiary.
Ms. Burket raised the preliminary objection that Ms. Domitrovich lacked standing to seek an accounting because she is not an aggrieved person: all assets were transferred inter vivos, there is no estate, and even if there was an estate, everything would go to Ms. Burket as the sole beneficiary.
Ms. Domitrovich had no evidence of Ms. Burket’s misappropriation, but rather, was seeking an accounting to determine if there was any impropriety.
The Superior Court affirmed the Orphans’ Court decision that Ms. Domitrovich lacked standing to sue at this time. The Orphans’ Court dismissed the petition and instructed Ms. Domitrovich that she could contest the validity of the decedent’s will. Following a will contest in which Ms. Domitrovich prevails, only then would the court agree that she had standing to then compel an accounting and to contest any actions taken by Ms. Burket.
Any of the following persons may petition a court to construe a power of attorney or review the agent’s conduct and grant appropriate relief:
The court may make an order for an account either on its own initiative or on the petition of:
The Pennsylvania Department of Aging is responsible for the oversight and implementation of the Older Adults Protective Services Act (“OAPSA”). OAPSA protects Pennsylvanians 60 years of age and older against physical, emotional, or financial abuse as well as exploitation, neglect, or abandonment. Reporting abuse is mandatory for employees and administrators in care settings.
Each county has a local provider of protective services. The local provider is either an AAA or an agency designated by the AAA.
Any person that has reasonable cause to believe that an older adult is in need of protective services may report such information to the area agency 24 hours a day, seven days a week, including holidays.
The OAPSA has an anti-retaliation provision stating that any person making a report or cooperating with the agency, and the victim shall be free from any discriminatory, retaliatory or disciplinary action, including intimidation, by an employer or by any other person or entity. Violators may be subject to a civil lawsuit by the reporter or the victim wherein the reporter or victim shall recover treble compensatory, compensatory and punitive damages or $5,000, whichever is greater.
The agency is responsible to provide for an investigation of each report made, and the investigation must be initiated within 72 hours after receiving the report.
In the event that the report is found to be unsubstantiated, the case is closed, and all identifying information about the reporter and the alleged abuser are immediately deleted from all records. Identification and circumstances of the alleged abused of the victim are maintained for a period of six months for purposes of substantiating a pattern of abuse.
If the report is substantiated, or if the client assessment is necessary to determines whether or not the report is substantiated, the agency shall provide for a timely client assessment if consented to by the older adult. The agency will then prepare written findings which are to include recommended action, including a recommendation as to whether to pursue civil or criminal remedies.
If the report is substantiated, at the conclusion of the investigation, the agency must notify the alleged perpetrator and must provide the alleged perpetrator with a brief summary of the allegations. The alleged perpetrator may appeal the agency’s findings.
Information contained in reports, records of investigation, client assessment and service plans are confidential. The information is not disclosed to anyone outside the agency other than to a court or pursuant to a court order.
If the investigation results in a report of criminal conduct, law enforcement officials are provided access to all relevant records maintained by the agency.
A subject of a report may receive, upon written request, all information contained in the report except information that would identify the person who made the report or cooperated in a subsequent investigation.
If imminent risk of death or serious physical harm is suspected, reporters are encourage to contact both the area agency on aging and law enforcement. If the AAA finds through investigation that the abuse rises to the level of criminal liability, the agency will inform the older adult of the various legal options, civil or criminal, as possible remedies. If the older adult requests the agency to contact law enforcement, the agency must timely contact the law enforcement agency.
Under 18 Pa.C.S. §§ 2713 and 2713.1, neglect or abuse of a care-dependent person is a criminal offense. The district attorneys of the counties and the Attorney General have the authority to investigate and to institute criminal proceedings for violation of these sections.
Other Potential Criminal Offenses:
To have a guardian appointed, a petition to adjudicate an individual as an incapacitated person must be filed.
Meaning of Incapacitated Person: An adult whose ability to receive and evaluate information effectively and communicate decisions in any way is impaired to such a significant extent that he is partially or totally unable to manage his financial resources or to meet essential requirements for his physical health and safety.
The court must consider and make specific findings of fact concerning:
The court shall prefer limited guardianship.
A provision in a will that purports to penalize an interested person for contesting the will, is unenforceable if probable cause exists for instituting proceedings (20 Pa.C.S.A. § 2521). To determine whether a presumption of undue influence arises, the contestant must prove, by clear and convincing evidence, that:
In re Passarelli Family Trust, 206 A.3d 1188, 1191n.3 (Pa. Super. Ct. 2019).
NOTE: A confidential relationship exists only where there is overmastering influence on the part of the proponents (In re Estate of Fritts, 906 A.2d 601, 609 [Pa. Super. Ct. 2006]). Assigning power of attorney does not in and of itself give rise to a confidential relationship, such determination is made on a case-by-case basis (Id. at 609).
Issues arise as to who is the “client” and therefore who holds the privilege. The client is the “principal” and thus has the attorney-client relationship. In any litigation, the agent would need separate representation—i.e., not the attorney preparing the POA or representing the estate of the principal. The party challenging the agent’s actions would need its own attorney.
All parties have an obligation to preserve potentially relevant evidence—include ESI—when litigation becomes reasonably likely. Whether you are the agent, principal, or other party, you should preserve all potentially relevant documentation beginning as early as possible. This includes bank records, emails, etc. If potential evidence is destroyed, potentially sanctions including monetary sanctions, adverse inferences, or default judgment.
“American rule” – default that each party pays for its own lawyer—regardless of whether agent, principal, or other party. There is an exception for “surcharge” – Orphan’s Court judges have the authority to “surcharge” parties as a way to shift the costs. All parties have an obligation to preserve potentially relevant evidence—include ESI—when litigation becomes reasonably likely.
Author: Alexander K. Cox
Originally published in October 2019
Copyright © 2019 Knox McLaughlin Gornall & Sennett, P.C.