‘He was recently taken to the hospital’: My elderly neighbor gave me power of attorney. Can his estranged daughter object?

‘He was recently taken to the hospital’: My elderly neighbor gave me power of attorney. Can his estranged daughter object?

Dear Quentin,

My neighbor is elderly, and he was recently taken to the hospital.

He has a daughter who was designated as having power of attorney for him and as the executor of his will. However, she burned those papers shortly after she signed the power of attorney form. He and his daughter have not seen each other or spoken to each other in at least three years.

He does not have any extra copies of the power of attorney document in his house, and the lawyer that prepared it is no longer practicing. My neighbor has now decided to assign power of attorney to me to allow me to handle his estate.

I signed a blank power of attorney form that was printed from a website run by the state of Pennsylvania. Prior to my neighbor signing, it was determined that he was coherent and understood everything. The new document specifically says that he revokes all previous durable powers of attorney.

Can his daughter challenge this? And will I be responsible for handling his estate after he dies?

Trying to Figure Things Out

Dear Trying,

I’m bewildered as to why your neighbor’s attorney, even if he is no longer practicing law, does not have a copy of the old power of attorney document in his files. What’s more, if these responsibilities include real-estate decisions, the documents should be filed in the land records office (or the office of the recorder of deeds in Pennsylvania).

That said, if you signed a new power of attorney form, and it meets the legal requirements, it will supersede any previous document, whether or not it was burned by your neighbor’s estranged daughter. She appears to not want any responsibility for her father’s affairs, but as you imply in your letter, that can always change after a person dies, especially when there is money involved.

As you note, there are power of attorney forms that can be downloaded from the Internet. Given the often unreliable sources of information on the web, this is not the most ideal way to assign someone power of attorney, but I have some hope that in this case, it was executed properly since it was done in the presence of your friend’s attorney. At the very least, the document must be signed by you and your neighbor (the “principal”), witnessed by two adults and notarized.

Can his daughter challenge this new document? Yes. Could she succeed? It would involve a timely and costly legal action where she would have to prove that your neighbor lacked testamentary capacity. That would require doctors and mental-health professionals to testify to his state of mind, whether he signed under duress and whether the power of attorney was properly executed.

If all of the above came to naught, it would still be possible for her to challenge your having power of attorney — in theory, at least — if she was able to prove that you abused your power, neglected your responsibilities, stole from your neighbor’s estate or simply mismanaged his assets due to incompetence. That, of course, would require a paper trail of pretty solid evidence.

In Pennsylvania, a power of attorney is assumed to be durable unless otherwise stated. That gives you — or whoever is named as the agent — the legal authority to act on behalf of the principal during their lifetime or if they become incapacitated. It lasts until the principal dies or decides to cancel it. Being an executor of someone’s estate is a separate role for which duties commence after that person dies.

Requirements for a power of attorney

According to Timoney Knox Attorneys at Law in Fort Washington, Pa., there are three requirements for a person with power of attorney: “Act in accordance with the principal’s reasonable expectations to the extent actually known by the agent, and otherwise in the principal’s best interests; act in good faith; and act only within the scope of authority granted in the power of attorney.”

You must, the firm adds, “act loyally for the principal’s benefit, act so as not to create a conflict of interest that impairs the agent’s ability to act impartially in the principal’s best interest, act with the care, competence and diligence ordinarily exercised by agents in similar circumstances, and keep a record of all receipts, disbursements and transactions.”

A copy of the power of attorney document has the same legal force as an original, Timoney Knox adds. “We usually provide our clients with a couple of originals and a couple of copies of their powers of attorney [and we] always tell clients to use a copy if at all possible. This becomes especially important if the principal becomes incapacitated and cannot execute another power of attorney.”

If you are named as executor for your neighbor, that is a separate role that would begin after he passes away. As executor, you would be responsible for initiating probate, administering and taking account of his assets and liabilities (such as real estate to bank accounts), carrying out his wishes in accordance with his will and distributing the assets to the named beneficiaries.

Before accepting this role, be aware that it would open you up to being held liable for damages if you breach your fiduciary duty or responsibilities as executor. Anyone who wants to challenge your role as executor must have a “pecuniary interest” in the estate — that is, they must be someone who stands to inherit — which means that such action could involve his daughter.

Given the financial and legal risks taken on by an executor, it’s not a job to be accepted without due consideration. The law in Pennsylvania suggests reasonable executor fees pegged at 5% of the estate if it’s valued at less than $100,000, 4% of the estate if it’s between $100,000 and $200,000, 3% if it’s valued at between $200,000 and $1 million, and so on.

It’s a noble thing to help your neighbor, but please proceed with care.

April is National Financial Literacy Month. To mark the occasion, MarketWatch will publish a series of “Financial Fitness” articles to help readers improve their fiscal health, and offer advice on how to save, invest and spend their money wisely. Read more here.

The Moneyist regrets he cannot reply to questions individually.

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