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Recent court decisions help protect seniors from: (1) inappropriate changes in estate planning documents; and (2) the failure of banks and other financial institutions to honor durable powers of attorney.

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Court Cases Give Seniors Protections

Two recent court cases, one in Illinois and the other in Florida, have given seniors protections that has been sorely lacking when banks arbitrarily refuse to honor powers of attorney and when friends or family seek to undo carefully crafted estate planning documents.

 Limitation on Power to Change Estate Planning Documents Is Not Void

An Illinois court of appeals has found that a provision in estate planning documents that requires an attorney's client to consult with the drafting attorney before making changes to the documents does not violate public policy and is in fact "admirable."

In 2006, Charles and Charlotte Dunn hired attorney Lawrence Patterson to draft estate planning documents for them, including a trust, powers of attorney and living wills.  Each of the documents contained a provision that required the Dunns to consult with Patterson before amending or changing the documents.

A few months later, Patterson received a letter from attorney Timothy McJoynt saying that he represented the Dunns and that they wished to remove his name from their documents. Patterson responded in writing stating he would have to meet with the Dunns before agreeing to the modifications or obtain a court order. A law suit followed.

In court, McJoynt argued that an attorney must follow the direction of his or her client even if the attorney deems the client action to be unwise, ill-conceived or imprudent.  Patterson argued that the consent requirement was designed to protect the Dunns from undue influence or other abuse as they age.  The trial court agreed with McJoynt, found the consent requirement void as violating public policy, and imposed sanctions on Patterson.

On appeal, the Court of Appeals reversed, finding that the limitation was a reasonable measure designed to protect the Dunns from abuse as they age.  Further, the court held that the revocation and amendment provisions of the documents are consistent with the fiduciary duty an attorney owes a client.  As a fiduciary, it was not unreasonable for Patterson to insist on a meeting with the Dunns before consenting to modification of their estate plan.  The appellate court noted that the elderly are often taken advantage of and the provisions in question were tailored to reduce the risk of undue influence. The court held that Mr. Patterson's conduct was not sanctionable; instead, the court found "it admirable and consistent with the highest ideals of the bar."

http://www.state.il.us/COURT/Opinions/AppellateCourt/2009/3rdDistrict/November/3070881.pdf

 Bank Pays for Refusing to Honor Request Made Under a Power of Attorney

In a recent Florida case, Bank of America rebuffed the request of an agent under a durable power of attorney (POA) to withdraw funds from a jointly held account. The agent fought back in court and just won a $64,000 judgment against the bank.

Clarence Smith, Sr., named his son, Clarence Smith, Jr., as his agent under a POA. When his father no longer wanted to manage his own finances, he asked Clarence Jr. to step in as his agent.

Clarence Jr. reviewed his father's account activity and became suspicious about some withdrawals from a bank account that Clarence Sr. owned jointly with a friend from his retirement community.  Acting as his father's agent under the POA, Clarence Jr., asked Bank of America to transfer $65,000 from the account into a new account that listed only his father as the owner.  Before doing so, Bank of America contacted the other person named on the account. When she told the bank that she did not want the funds withdrawn and also accused Clarence Jr. of stealing his father's money, Bank of America refused to honor Clarence Jr.'s request. The other account owner then withdrew all of the funds from the account and placed them into her own account. Clarence Sr. died several weeks later.

Clarence Jr. sued Bank of America under a Florida law that imposes penalties on financial institutions that refuse to honor reasonable requests from agents named in properly executed POAs. In November 2009, after a week-long trial, a Florida jury returned a verdict against the bank and awarded $64,142 to Clarence Sr.'s estate. The jury found that Bank of America had not acted reasonably when it rejected Clarence Jr.'s request, even though the joint owner of the bank account had not agreed to the release of the funds.  Bank of America said it plans to appeal. "We believe that neither the facts nor the law support the verdict," said spokeswoman Shirley Norton.

Author's note: Illinois has a similar law that provides for damages in similar circumstances: 755 Illinois Compiled Statutes 45/2-8.

This article will be published in the next issue of the Southern Business Journal.


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Phone: (618) 985-4529