After TRS’ wife died, he decided to change some of his estate planning.
The first thing he did was sign a new Durable Power of Attorney (financial), naming his step-daughter, Cyndi, as his agent.
TRS then asked Cyndi to help him change the named beneficiaries on his annuities and bank accounts. When all was said and done, Cyndi had been named the beneficiary on about $275,000 of investments, and the remaining $30,000 was left to his estate.
Then TRS died. And Cyndi got sued by the other beneficiaries.
Cyndi lost and had to forfeit her inheritance. Here’s why.
When TRS named Cyndi as his agent in his Durable Power of Attorney, she became his fiduciary. At that point, the law presumed that all transactions between Cyndi and TRS were fraudulent and void. She had the burden of proving that the transactions were valid. She had to show that she had acted fairly and informed TRS of all of the material facts.
Cyndi couldn’t carry that burden. Few people could.
The same analysis would apply if TRS had just given Cyndi the investment accounts while he was still alive. It wouldn’t matter if the suspect transaction was a gift, or a legacy, or a business deal. The moment Cyndi was named as an agent under the power of attorney, she was held to the higher standard.
Basically, Cyndi made a bad mistake. If she wanted the inheritance, then she should have refused to help him change the beneficiaries. She should have referred him to someone independent – a financial advisor, a lawyer, a CPA – to give him advice. She should have documented why he was making that decision. She should have resigned as his agent under the Power of Attorney, or refused to allow him to name her in the first place.
Or she could have refused to be named a beneficiary in the first place. She couldn’t, and shouldn’t, have tried to profit from her principal.
Choose it or lose it.
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The information contained in this article is general information only and does not constitute legal advice.