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Powers of Attorney

Powers of Attorney are often used and abused by heirs.  A recent Arkansas Supreme Court Case, Duke v. Shinpaugh addressed the issue of the person who received the power conveying property to themselves.

Duke involved the daughter/stepdaugher of a couple who moved in to take care of her mother and stepfather in 1997. After her mother died in 2005, her stepfather executed an “agreement” which purported to give the daughter one acre of land as well as other personal items. The following day, he executed a power of attorney in favor of his stepdaughter. In 2006, she conveyed the one acre to herself for $1. A month after that, her stepfather died.

The stepfather’s children were appointed administrators of the estate and sued to get the one acre back, claiming she had breached the fiduciary duty that comes with a POA in conveying the property to herself for $1. Washington County Circuit Judge Mark Lindsay agreed, and declared the deed void.

Judge Lindsay did so on two grounds which are relevant to all holders of POAs. One, that because of the confidential (close) relationship between the stepdaughter and stepfather, there was a presumption that the POA was obtained under undue influence, and the presumption had to be rebutted beyond a reasonable doubt. Two, that even if she had rebutted the presumption, the deed to herself breached her fiduciary duty under the POA.

The Supreme Court said the stepdaughter didn’t have enough evidence for it to overturn, so the ruling was upheld. If you’re a realtor with an opportunity to list property where someone holds a power of attorney or the client is a family member who obtained property via a POA where they had the power or a relative did, you should probably avoid the situation because you will likely have title problems or your seller is going to face a situation similar to this one.

The other lesson here is that trying to do estate planning without consulting a lawyer is a bad idea. This could have been resolved with a relatively simple and inexpensive will. It seems particularly sad in this case, where based on the facts in the opinion it appears the stepdaughter took care of her mother and stepfather for nearly a decade, and the stepfather recognized this and wanted to take care of her as a result.

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