Elva Mae Hemphill passed away at the age of ninety-nine without a will. Her primary assets consisted of five certificates of deposit and a checking account. As of April 6, 2007, she had named three of her sisters as joint owners of her various CDs and savings account. On that day, because her health had begun to decline, Elva Mae signed a power of attorney appointing Geraldine Covington and Larry Ferris as her attorneys-in-fact. Geraldine is Elva Mae’s niece, and Larry is married to another of Elva Mae’s nieces, Cathy Ferris. When Elva Mae died less than three years later, her sisters were no longer joint owners of any of her assets. Rather, through a series of transactions, the CDs and savings account that she owned in April 2007 had been redeemed or liquidated, and the proceeds had been used to purchase new CDs or deposited into a checking account. Geraldine and the Ferrises were named as joint owners of the checking account and all of the CDs that Elva Mae owned at the time of her death. Thus, these assets all passed to Geraldine and the Ferrises.
Another of Elva Mae’s nieces, Gloria Swank, was appointed administrator of her estate and, on behalf of the estate, filed suit against Geraldine and the Ferrises. The chancery court considered the question: who has standing to challenge the changes of the assets made by the power of attorney agents – the sisters who were removed as joint owners, or Elva’s estate?
The chancellor held that the proper parties with standing to challenge the transactions related to Elva Mae’s CDs after the date of execution of the POA were the joint tenants on those accounts who survived her death. However, the appeals court held that Elva Mae’s surviving sisters were not the proper parties to challenge transactions executed in violation of the terms of the POA. A POA is nothing more than one form of a principal-agency relationship. By virtue of the POA the attorney-in-fact owes certain duties to the principal. However, an agent is not liable to third parties for breaches of the duties that he owes to his principal. Thus, Elva Mae’s surviving sisters would not have been the proper parties to challenge transactions executed in violation of Elva Mae’s POA.
There is no basis for treating the sisters as third-party beneficiaries of that instrument. As ordinary nonparties to the POA, they would have had no claim against Geraldine for losses allegedly resulting from Geraldine’s breach of duties or obligations under the POA. Geraldine owed those duties and obligations to Elva Mae, not her sisters. The estate is the proper plaintiff and does have standing. The POA prohibited Elva Mae’s attorneys-in-fact from profiting from their role, commingling their funds with hers, or taking ownership of her assets. These protections were for the benefit of Elva Mae alone. During her lifetime, she could have commenced an action to set aside Geraldine’s and the Ferrises’ joint ownership of the CDs. Therefore, upon her death, her estate became the proper party to commence such an action.
(In Re Estate Of Hemphill, No. 2014-CA-00479-COA)  http://courts.ms.gov/Images/Opinions/CO109814.pdf
Powers of attorney are powerful documents. We frequently advise agents – and the principals – about the proper use of these important estate planning documents.  Contact our Mississippi Elder Law Attorneys online or call us at 601-987-3000 for help with your power of attorney.