The Importance of Caution in Drafting and Using of Powers of Attorney

This law office has commented in previous posts on financial abuse of the elderly and has recommended a few common sense steps to combat that threat, including financial powers of attorney [POA’s] so long as “well-drafted and responsibly used.” Recently, appellate courts in both Mississippi and Florida have rendered opinions underscoring both inherent issues with and the potential usefulness of POA’s. The Mississippi Court of Appeals commented in The Matter of Estate of Elva Mae Hemphill (Miss. Ct. App. February 9, 2016) that powers of attorney are “nothing more than [instruments] that allow a principal to convey to an agent the authority to act on [his or her] behalf in identified matters.” The Hemphill case involved an agent (or “attorney in fact”) who used Elva Mae Hemphill’s POA to convert her certificates of deposit into new CD’s naming the attorneys in fact as joint owners. Such misuse of POA’s is not uncommon and is not illegal in all instances. Indeed, courts have long recognized that broadly worded POA’s “carry an inherent potential for fraud and abuse.” Estate of Elva Mae Hemphill, at ¶ 57. “This is not only because of the broad authority such powers confer but also because in many cases the power is granted precisely because the principal is vulnerable or dependent on others.”

Mindful of its benefits but also aware of the potential for its abuse, Ms. Hemphill and her attorney wisely included in her POA certain protections. Her power of attorney disallowed attorneys in fact from personally gaining from any transaction completed on behalf of Ms. Hemphill, prohibited mixing any funds owned by the attorney in fact with Ms. Hemphill’s funds, and prohibited the attorney in fact from receiving any compensation except for reimbursement of out of pocket expenses. Because of these crucial provisions, the liquidation of the CD’s in the Hemphill case was voided by the Court of Appeals and the money was returned to her Estate. 

The importance of limiting a POA’s authority was also underscored in a recent Florida Court of Appeals decision.  In Manor Oaks v. Campbell, No. 4D18-3297 (Fla. 4th DCA July 31, 2019), the Court of Appeals determined that a healthcare POA did not authorize a healthcare surrogate to consent to arbitration of a negligence claim on behalf of a decedent against Manor Oaks Nursing and Rehabilitation Center.  The Court pointed out that “the body of the document clearly narrows its scope to health care matters, which do not include decisions regarding arbitration of disputes.” 

The lessons from Hemphill, Campbell, and other Florida and Mississippi cases are clear. First, be careful who you trust with a power of attorney. Second, when you do vest someone with such power, include careful limitations, such as those in Hemphill and Campbell.