As people get older and involve others to assist them, questions often do arise concerning the identity of the ultimate boss over the affairs of those senior people who have agreed to accept assistance.
As long as a person is of sound mind, that person is the boss of his or her affairs. Period. Independent of that ideal situation, consensus (general agreement) among family members should always be the first goal. However, we know that different perspectives and opinions are like noses; we each have one and no two are the same.
In the context of estate planning, people (called “principals”) can formally appoint other people (called “agents”) to make decisions for the principals. This appointment is usually (but not always required to be) in writing in a document called a power of attorney. The scope of the authority granted to an agent is set forth in that writing. Obviously, written documents cannot contemplate every possible scenario. To address that practical problem of gaps in the document, the law requires that if an agent knows what a principal wants, the agent must do what the principal wants.
For example, a father who has allowed his daughter to help with his daily affairs may verbally tell the daughter, “Don’t ever sell my antique stamp collection to my neighbor Jones.” The daughter may not even know why her father wishes for Jones to not have the stamp collection, but the daughter is legally prohibited from selling the stamp collection to Jones.
If the daughter possesses the stamp collection, Jones or anyone else may not know who the actual owner of the stamp collection is or whether there are limits on the terms (price, etc.) or buyers of the stamp collection. Therefore, based on various circumstances, the daughter might, as a practical matter, be physically able to sell the stamp collection to Jones.
Ideally, the daughter’s covert sale could and should be preemptively avoided. However, even if all signs point toward the daughter selling the stamp collection to Jones at her first covert opportunity, courts are generally reluctant to get involved unless and until a mistake or wrongful act is undertaken. The courts thereafter can help bring the daughter to task for the unlawful sale (even if the daughter gave the money for the stamp collection to the father).
To preclude “rogue” agents from the very start, it is best to choose the most trustworthy agents possible (ideally without conflicting interests but with applicable knowledge, like appointing someone with agriculture knowledge if the decisions to be made deal with farming). It is also advisable to require “accountings” (documents that list and describe every transaction) on a regular basis, ideally no less frequently than once a year. Finally, although it may be less efficient, including other people (like additional siblings of the agent) in the decision-making can provide additional checks and balances on potential wrongdoing. Of course, if a principal is of sound mind, the principal can always provide additional instruction or replace the agent.
Lee R. Schroeder is an Ohio licensed attorney at Schroeder Law LLC in Putnam County. He limits his practice to business, real estate, estate planning and agriculture issues in northwest Ohio. He can be reached at Lee@LeeSchroeder.com or at 419-659-2058. This article is not intended to serve as legal advice, and specific advice should be sought from the licensed attorney of your choice based upon the specific facts and circumstances that you face.