For various reasons, it is often necessary to use power of attorney relationships in the management of trusts. In some circumstances, unfortunately, disputes may arrive and need to be litigated under Texas law. In our Dallas law firm, we have experienced two common patterns in litigation over power of attorney, which we review here.
Litigation Involving Powers of Attorney
With a practice focused on probate litigation, our law firm routinely encounters many standard fact patterns involving some of the same legal issues. We regularly take one side or the other in will contests involving a claim of the testator’s lack of testamentary
capacity, or undue influence. We routinely see disputes arise in the administration of trusts, where a fiduciary is either suing someone on behalf of the trust, or being sued by a beneficiary for one reason or another. Another type of probate litigation that we routinely encounter involves powers of attorney.
In cases involving powers of attorney, one person (the principal) has appointed another person (the agent) to act on their behalf. Litigation in this arena almost invariably involves one or both of the following issues:
• The principal lacked the requisite mental capacity to sign the document; or
• The agent exceeded the scope of his or her authority.
With regard to the principal’s mental capacity, the mental capacity required to sign a power of attorney is the same mental capacity required to sign any other contract (“contractual capacity”). Thus, in cases where the principal’s mental capacity is called into dispute, we often look to medical records to help resolve the issue. While this standard of capacity is often considered to be “higher” than the mental capacity to execute a last will and testament, the practical reality is that the standard is usually easier for judges and juries to apply. As a result, judges and juries often find contractual capacity, but somehow struggle with what should be a more relaxed standard of testamentary capacity. In any event, the lesson learned is that timely and adequate medical records and expert testimony are critical in power of attorney litigation involving a principal’s mental capacity.
Cases involving an agent exceeding his or her authority are almost always centered upon the agent’s “self-dealing” or the agent’s participation in trying to change the principal’s estate plan. In these cases, we frequently must look to the acts of the agent, particularly those under which the agent receives some benefit from the transaction. Such transactions are presumptively unfair, which means the agent absolutely must be prepared to defend the fairness of the transaction. Good and accurate records are a goldmine in these cases, and they can make or break a case.
This blog post has outlined two of the more common issues that may provoke litigation over power of attorney. Regardless of the side you are on, our Dallas attorneys are ready to consult with you, review the facts, and give advice on possible issues under Texas law. No two situations are exactly, alike, however, so be sure to reach out for a consultation. Our Dallas location makes it convenient to anyone for anyone North Texas, and telephone consultations are an alternative for anyone out of state or farther from the Dallas Fort Worth Metroplex.