POA Accountings

POWER OF ATTORNEY ACCOUNTINGS (NH LAW)

In seminars, I sometimes refer to powers of attorney as “licenses to steal.”  Although made part in jest, the comment can be all too true.  Millions of elderly impaired Americans have delegated control over  their finances by granting a power of attorney to a family member, usually a child.  While in most instances, the child acts responsibly, the control over the parent’s wealth can become a means of exploitation.  Typically, the child has no accountability to anyone other than the parent who may be too impaired or timid to monitor the child’s management of the finances.  If the parent is incapacitated by dementia or some other disability, the child commonly answers only to his or her sense of honesty, which, if not high, can lead to embezzlement and theft.  All too often, the rest of the family discovers the misappropriation when the parent dies and they learn that the estate, which should have been substantial, is paltry.

An attorney-in-fact has duties under RSA 564-E:114 to act:

1. 1. With loyalty to the Principal’s best interest;
   2. In good faith;
   3. To avoid conflicts in interest;
   4. With the same care as a similarly situated agent; and
   5. To “keep a record of all receipts, disbursements, and transactions made on behalf of the principal.”

RSA 564-E:116 permits the family and others to compel an accounting from the attorney-in-fact and is the most important remedy for power of attorney abuse under New Hampshire law.  Accounting claims under the statute are the most common actions I file in my Probate Court practice.  In some cases, the attorney-in-fact has misappropriated millions of dollars.

The statutory remedy is broad and flexible.  Actions may be brought by:  the principal; the agent; a spouse, child, or parent of the principal; the principal’s heirs; any person named in the principal’s will; a treating health care provider; the Department of Health and Human Services; law enforcement; or anyone who demonstrates an interest in the welfare of the principal and lack of capacity of the principal to bring the action.  RSA 564-E:116(a).  Not surprisingly, actions are most commonly brought by a child of the principal to compel an accounting from a sibling.

Actions may be brought to determine whether a power of attorney continues to be in effect, or should be or has been terminated, to determine the legality of acts taken or proposed, and to compel an accounting.  The statute requires that a written demand for an accounting be made sixty days before filing the petition, which time period can be reduced for “good cause.”  RSA 564-E:11(h).

“Upon motion by the principal, the court shall dismiss a petition filed under this section, unless the court finds that the principal lacks capacity to revoke the agent’s authority or the power of attorney.” RSA 564-E:116(c).

The Court will evaluate the agent’s conduct relative to the requirements of the instrument and the duties above.  An exculpatory provision will be honored except to the extent it:

1. 1. Relieves the agent for breach of duty committed dishonestly, with an improper motive, or with reckless indifference to the purposes of the POA or the principal’s best interests; or
   2. Was inserted as result of an abuse of confidential relationship with principal.

RSA 564-E:115.

Factors for evaluating a proposed or contested gift under 564-E:217:

1. 1. The terms of the POA;
   2. Principal’s interests and intent;
   3. His/her gift history;
   4. His/her estate plan;
   5. His/her future needs; and
   6. Tax considerations.

A contested gift shall be presumed lawful if the instrument expressly grants the authority to make the gift and is accompanied by statutory disclosure statement; “otherwise the agent shall be required to prove by a preponderance of the evidence that the gift was authorized and was not a result of undue influence, fraud, or misrepresentation.” RSA 564-E:116(g)(3)

The court has broad powers in fashioning a remedy.  Reasonable attorneys’ fees may be awarded if the Court finds the agent “failed [to account] without any reasonable cause or justification” or “clearly violated the agent’s fiduciary duties.”  RSA 564-E:116(e).

A peculiar aspect of the statute is its requirement that proceedings, absent “good cause”  shall be closed to the public, although the final decision shall be a public record. RSA 564-E:116(f).  The provision is of doubtful constitutionality because it reverses the First Amendment presumption “strongly in favor of open judicial proceedings.”  Keene Publishing Corp. v. Keene District Court,  117 N.H. 959, 962 (1977).  Because hearings in these, like other, cases generally are attended only by those involved, this issue generally is of just academic interest.

These cases often involve financial exploitation of the elderly.  Counsel must be mindful of the strict obligation under RSA 161-F:46 to report to the Bureau of Elderly and Adult Services suspected elder abuse and neglect.

Durable powers of attorney are widely used for estate and financial planning.  The instruments most often appoint as agent a child of the principal and provide for no oversight by anyone other than the parent.  When the parent becomes incapacitated by dementia or other frailties of old age, the child may fail to resist the temptations of self-enrichment.  RSA 564-E:116 offers a powerful and flexible remedy for family members and others with an interest in the parent’s welfare to compel the child to account for and redress any abuse of his or her authority.

(Note: Ralph Holmes is currently retired from McLane Middleton. For information on this or other probate litigation issues, please contact Alexandra Cote at alexandra.cote@mclane.com.)