Improper Use of Powers of Attorney for Property*

Recent Illinois court decisions highlight the dangers posed by fraudulent action taken by an agent under a power of attorney. In both cases, an agent acting as power of a attorney acted to obtain ownership of property of someone who had signed a power of attorney for property.

In the first decision, a child acting as power of attorney for her mother had her mother execute a transfer-on-death agreement for her mother’s investment account naming the daughter as the sole beneficiary of the account. In the other case, a mother, whose son was acting as power of attorney for her, changed the title of several certificates of deposit into joint tenancy between herself and son. The issue raised by both cases was whether the funds (the investment account and the CDS) belonged to the estate or to the agent after the principal’s death.

The relationship between an agent and a person executing a power of attorney is a fiduciary relationship, meaning that the agent (the person named in the power of attorney) must be loyal to and act in the best interest of the principal. Under Illinois law, if there is a fiduciary relationship, it is presumed that any action taken on behalf of a principal for the benefit of the agent is fraudulent, unless the agent can meet a burden of proof to prove otherwise.

Where the transaction benefits the agent, the agent can present evidence to show that he or she did not exert undue influence on their principal and that the action taken was lawful. In both of these cases, however, the court determined that the agents did not meet his burden of proof by the presentation of evidence to prove that they had acted in accordance with law and fulfilled their fiduciary duties. The courts decided that the property (the investment account and the CDS, respectively) belonged to the estate and were not owned by the agents.

When you choose an agent under a power of attorney for property, it is important to choose a person who will you can trust to communicate your preferences about distribution of your property with that person before you become incapacitated. Any agent who has been named under a power of attorney should educate themselves about the responsibilities of the role to avoid any appearances of acting fraudulently. You should contact your attorney to determine your responsibilities of an agent acting under a power of attorney for property.

*Ralph E. Elliott is a Freeport, IL Attorney whose has over 30 years of experience including an Estate and Power of Attorney practice. Ralph is the senior attorney at the law firm of Law Offices of Ralph E. Elliott, A Professional Corporation situated at 1005 W. Loras Drive, Freeport, IL 61032 which serves business, individuals and farmers in Northwest Illinois.

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