Providing Customized Legal Solutions Since 1979

New Case Law Regarding Joint Accounts with Agents Under Power of Attorney

by | Nov 30, 2023 | Firm News

Powers of attorney are an important document in everyone’s estate plan.  I tell my clients that everyone over the age of 18 should have both a power of attorney and advance health care directive.  With statutory forms available online for a basic power of attorney, it is easy to get something in place.

However, it is important to put some thought into who is named as the agent (also known as attorney-in-fact) in the power of attorney.  If the power of attorney is not the statutory form, then it is also important to consider what powers you give to the agent.  An agent’s powers can be as broad or as narrow as you want.  The point of a power of attorney is to avoid the need to go to court and having a conservator of the estate appointed to handle your assets and financial matters when you are unable to handle them yourself.  I have had matters where the incapacitated person had executed a power of attorney and the agent was willing and able to act, but the power of attorney did not give the agent a power that they needed so we had to obtain a conservatorship just for that limited authority.

What prompted this post is a case that was decided in April 2023 that limited the authority of an agent under a power of attorney regarding the handling of an account that the agent was a co-owner.  In Pool-O’Connor v. Guadarrama (F083954, filed April 25, 2023, Fifth District) Mr. Pool executed a power of attorney naming his nephew as his agent and Mr. Pool had also set up an account with his nephew listed as a signor.  Mr. Pool also had a trust that he had established with his deceased wife that provided for their children, his wife’s sister and other people including the nephew.  The nephew, as agent under the power of attorney, deposited funds into the joint account while Mr. Pool was alive and the funds were Mr. Pool’s funds.  The nephew withdrew funds both before Mr. Pool’s death and after his death.  The total amount withdrawn was more than what the nephew was entitled to receive under Mr. Pool’s trust and what he was allowed to withdraw under the power of attorney.  The other beneficiaries under Mr. Pool’s trust requested relief from the court for the nephew’s actions.

The court held that the nephew had to return all the funds to Mr. Pool’s trust except for the amount the nephew was entitled to under the terms of the trust and power of attorney.  The court also held that the nephew had violated his duty to Mr. Pool under the power of attorney.  The power of attorney did not specifically give the nephew the authority to create a survivorship interest in funds deposited in the joint account.  The court also noted that the nephew claiming ownership in the account, as evidenced by his withdrawal of funds in the account, was contrary to Mr. Pool’s estate plan.

The takeaway from this case is threefold.  First, you need to carefully consider who you are naming as your agent to handle your finances when you are unable to handle them.  Second, review the powers that you are giving the agent and make sure you are comfortable with them and whether you need to expand or contract the powers.  And finally, be aware of the titling on your assets especially those that are held outside of a trust.