Often during the final days of a person, agents act on that person’s behalf pursuant to a power of attorney or POA. This enables trusted agents to make decisions when it comes to health, finances, and other important matters that a person may no longer be capable to make.
But one often misunderstood fact is that the POA also ends at the moment the principal dies. Agents who have so far acted in paying bills, transferring funds, or settling accounts may mistakenly believe they can still do so after the principal’s death. It does feel like a natural transition of settling things for a decedent after they pass away.
The problem is that in California, a POA expires at the moment of death, which means that any action taken by an agent pursuant to the POA document is no longer authorized or valid.
Moreover, it can result in severe penalties for the agent or attorney-in-fact.
A Case Study: Pool-O’Connor v. Guadarrama (2023)
This lesson is illustrated in the landmark case of Pool-O’Connor v. Guadarrama (2023). Here, the nephew, acting as an attorney-in-fact, withdrew funds from his uncle’s trust and deposited it in a joint account with both of their names. After the death of his uncle, the nephew withdrew funds from the joint account, claiming he had survivorship rights as a joint account holder.
The court did not see it that way, however. First of all, the nephew had no authorization to withdraw funds from the trust, or to create survivorship rights in a joint account where he was also a joint account holder, and which he also created without authorization. And when he withdrew the funds from the joint account after the death of his uncle, the court viewed it as an unauthorized attempt to circumvent not only the decedent’s actual estate plan, but also the legal prohibition against post-death activity pursuant to a POA.
The court reversed the agent’s actions, and he was required to return all funds and property with interest. He was also deemed to have forfeited any compensation or reimbursement for any services he may have rendered as an attorney-in-fact.
Uncovering Post-Death Activity
The problem is that sometimes, a personal representative may not have a full picture of all of the decedent’s assets. If the personal representative was not aware, for instance, that the decedent had a separate bank account in another state, from which an agent or attorney-in-fact had been withdrawing funds post-death, then those assets could be wrongfully depleted before the estate has a chance to secure them.
In this scenario, the heirs and successors would have been deprived of their rightful inheritance, the estate would have lesser assets to pay off costs, debts and liabilities, and the personal representative might even become liable for failure to preserve the estate assets.
The good news is that California Probate Code offers the personal representative a number of tools that he or she can utilize to conduct a thorough investigation:
- Creating and filing an Inventory and Appraisal of the estate properties and assets under California Probate Code §§8800–8850, which can help identify or detect any discrepancies or inconsistencies;
- Court-ordered citations under Probate Code §§8870–8873 ordering a person to appear to appear before the court and be examined concerning any property of the estate, to produce documents, or answer questions under oath, with failure to comply potentially resulting in contempt;
- Banks and any financial institutions that held any of the decedent’s accounts can also provide records to enable the personal representative to trace any unlawful transfers or transactions
A very red flag would be any transaction that took place after the decedent’s death. Once an investigation is done and the person who undertook the transfer or withdrawal is identified, they would, at a minimum, be required to return the properties or assets taken.
Asserting that it was a valid action done pursuant to a POA is no defense since, after death, the POA is no longer valid.
Accountability for Post-Death Actions
If you were an agent acting pursuant to a POA, perhaps you were doing so in good faith. Maybe you were not informed that the decedent had passed away. Or maybe the surviving family of the decedent had asked for your assistance in settling payments for some outstanding bills that have come due, like utilities, credit card bills, or a mortgage, and you believed that the decedent would have wanted you do to so.
Good intentions, however, are not a defense. As soon as the principal to a POA dies, the POA terminates. There is no transition period. Any action from then on would be undertaken by the personal representative, on behalf of the decedent’s estate.
An agent who had acted pursuant to a POA after the death of the principal could potentially be held liable for both surcharges and double damages.
Surcharge
Surcharge is the term used for the personal liability of a fiduciary (in this case, the agent or the attorney-in-fact) to repay the estate from their personal assets for any loss or depreciation of the estate resulting from the agent’s unauthorized actions.
For instance, if the agent or attorney-in-fact acting pursuant to a financial POA had paid the monthly mortgage out of the decedent’s assets, the court could order him or her to restore the value of that monthly mortgage to the estate, out of his or her own pockets.
Double Damages
While surcharge deals mostly with the repayment or restoration of the assets to the estate, when the agent or attorney-in-fact acted intentionally and with bad faith by wrongfully taking, concealing, or disposing of estate assets, then Probate Code §859 comes into play.
On top of being made to repay or restore the property taken, the person may also be liable for twice its value, including, in the court’s discretion, reasonable attorney’s fees and costs.
This means that potentially, a person can effectively be held liable for up to three times the value of the property recovered, or double damages on top of the value of the property recovered. In the case of Estate of Ashlock (2020), the court stated that the penalty under Probate Code §859 is in addition to, and is separate and distinct from, the recovery of the misappropriated penalty.
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Even well-meaning post-death actions can be a breach of fiduciary duty, exposing an agent to surcharges and double damages under Probate Code §859. To protect the estate and recover wrongfully taken assets, consult a qualified probate attorney as soon as possible.