A power of attorney is a document where you give an agent the authority to act on your behalf with respect to property. An agent (also known as an “attorney-in-fact”) has a duty under California law to “observe the standard of care that would be observed by a prudent person dealing with the property of another.” This means that the agent may be legally liable if he or she mismanages or squanders your property.
Former Agent Ordered to Compensate Principal Over Uncollected Rent
A recent California appeals court decision illustrates how an agent may exceed the authority granted under a power of attorney. This case is only an example and should not be treated as a definitive statement of California law on this subject.
In 1983, two men began living together in Orange County. In 2008, one of the men (who we will call the “principal”) signed a power of attorney naming the other man as his attorney-in-fact. Among other things, the agent had authority to manage a rental property owned by the principal.
For many years, the principal had been exhibiting symptoms of dementia. After the principal was hospitalized in early 2012, his daughter expressed concern over how the agent was caring for her father. Eventually, the daughter successfully petitioned a California probate court to appoint a permanent conservatorship over her father’s person and estate.
The conservator then sued the now former agent, alleging he had mismanaged the principal’s rental property. Specifically, he failed to collect more than $43,000 in back rent from the property’s tenant. The former agent said the failure to collect was a “settlement” to prevent the tenant from suing over an accident that occurred on the property. Alternatively, he claimed it was a “Christmas gift” to the tenant.
The courts found neither excuse convincing. The California Fourth District Court of Appeal, affirming the probate court’s earlier decision, said the former agent failed to “observe the standard of care” required by law. In plain terms, the power of attorney did not give him the discretion to waive rent payments that were owed to the principal.
The “settlement” argument failed because the former agent did not actually obtain a release of liability or written agreement with the tenant. The tenant therefore could still have sued the principal over her purported injuries. As for the waiver serving as a “Christmas gift,” the Fourth District said that “simply violated the prudent person standard of care imposed on him” by law.
Get Help From a California Estate Planning Attorney
When naming an agent in a power of attorney, you should take care to appoint someone that you can trust to handle your property and finances. And if you suspect that a physically or mentally incapacitated family member is the victim of an unscrupulous agent, it may be necessary to take legal action to protect your loved one. An experienced San Diego estate planning lawyer can advise you on these and many other subjects. Contact the Law Office of Scott C. Soady to speak with an attorney today.