September 3, 2013
Authored by: Stephanie Moll and Stephen Daiker
With research and drafting assistance from Washington University School of Law student, Kelsey DeLong.
In Estate of Lambur, the Missouri Court of Appeals addressed the issue of whether an attorney-in-fact is permitted to gift the principal’s property to herself when the gift is not expressly authorized in the power of attorney.
In 2005, Verna Irene Lambur (“Irene”) executed a durable power of attorney naming her nephew’s wife, Anna Stidham (“Anna”), and Jackie Johnson (“Jackie”) as her attorneys-in-fact. The power of attorney granted Irene’s attorneys-in-fact the following power:
“To establish, change or revoke survivorship rights in property or accounts, beneficiary designations for life insurance, IRA and other contracts and plans, and registrations in beneficiary form; to establish ownership of property or accounts in my name with others in joint tenancy with rights of survivorship and to exercise any right I have in joint property; to exercise or decline to exercise any power given to me to appoint property [sic]; to disclaim or renounce transfers to me of property; to make inter vivos gifts of my property to my lineal descendants, including my attorneys in fact, in amounts that are equal by line or class and in an amount for any person that does not exceed in any year the annual gift tax exclusion[.]”
Shortly after the execution of the power of attorney, Anna and Jackie transferred assets that Irene owned, individually, into two new accounts, each titled in the names of Irene, Jackie, and Anna, with rights of survivorship. Upon Irene’s death in May, 2005, the combined value the two accounts was $129,134.46. A week after Irene’s death, Anna closed the two accounts, was issued a check payable to herself, and thereafter spent a portion of the money on her and her husband’s debts and expenses. The rest of the money was deposited in joint accounts with her husband. Irene’s siblings filed suit, alleging (1) that Anna did not have the authority to make the gift of all of Irene’s assets to herself because the power of attorney did not expressly give her that power, and (2) that the evidence showed that Anna’s husband, Matt, benefited from the misappropriated funds, when he knew, or should have known, the source of the funds.
The Court found that the issue was not whether the attorneys-in-fact had the authority to open the joint accounts, or to use the funds during Irene’s lifetime, but whether Anna had a right to possession of the assets in the accounts after Irene’s death. Under Missouri law, a deposit of the principal’s proceeds into a joint bank account where the attorney-in-fact had a right of survivorship is a gift to the attorney-in-fact, therefore, the transfer was a gift to Anna.
Missouri law prohibits an attorney-in-fact from making a gift of the principal’s property to herself, unless expressly authorized in the power of attorney to do so. The authorization must be in writing; oral authorization by the principal is irrelevant. Powers of attorney are strictly construed under Missouri law and the only language in the power of attorney authorizing Anna to make a gift to herself, the language quoted above, limits her to gifts in one year not to exceed the annual gift tax exclusion amount. Based on this, the Court held that Anna violated her fiduciary duty to Irene when she withdrew funds from the joint account in excess of $11,000.
With respect to Matt, the Court found that genuine issues of material fact existed as to whether he benefited from the funds. For that reason, the Court reversed and remanded as to Matt.
In order to avoid this type of situation, if you are appointed as attorney-in-fact under someone’s power of attorney, you should definitely have a clear understanding of what the document does and does not authorize you to do, especially if you plan to take an action that personally benefits you. You’ll notice that the other attorney-in-fact, Jackie, wasn’t a party to the lawsuit. The opinion doesn’t state why she wasn’t named, but we can assume it’s because, while she was a participant in creating the accounts, she did not withdraw any of the funds at Irene’s death and personally benefit from them. If you are unsure of what actions you can and cannot take as attorney-in-fact, you should contact your attorney and ask them to review the document with you.