Planning for Life

Probate Court Upholds Beneficiary Designation: Attorney-in-fact Executed Documents for Her Own Benefit

Posted by Harry S. Margolis on December 23, 2016

Find me on:

When can an attorney-in-fact change an estate plan for her own benefit? When it's what the grantor or the durable power of attorney wants. In Giroux v. Laranjo, et al. (Bristol Probate Court Docket Nos. BR15F0006QC and BR13P2422EA, March 4, 2016), the court upholds the validity of a schedule of trust beneficiaries executed by Patricia A. Giroux as attorney-in-fact for Joseph A. Peixoto even though she stood to gain a considerable amount from its execution.

The Story

In 2012, Peixoto was diagnosed with amyotrophic lateral sclerosis, better known as ALS or Lou Gerhig's disease. Following his diagnosis, Giroux, a close friend, became Peixoto’s caretaker. In March of 2013, Peixoto contacted an attorney, James F. Roger, about changing some of his estate planning documents. The two had various meetings and exchanged multiple drafts of these documents. In June of 2013, Peixoto executed a durable power of attorney nominating Giroux as his attorney-in-fact, a will changing the distribution of his estate and naming Giroux as his personal representative, and a health care proxy.

In July of 2013, Peixoto contacted Attorney Rogers asking him to make changes to a trust that he had executed in 2006 containing a piece of property in Taunton, Massachusetts. More specifically, Peixoto wanted to change the schedule of beneficiaries, which detailed the names of the individuals who would benefit from the trust property upon his death and their respective interests, so that it would be in accordance with his recently executed will. In September of 2013, while Attorney Rogers was drafting the changes, Peixoto slipped into a semi-comatose state and was unable to execute them. Attorney Rogers spoke with Giroux about how she could execute the documents as Peixoto’s attorney-in-fact and she did so days before his death. 

The Challenge

After Peixoto died, the five individuals who were listed on the original schedule of beneficiaries and stood to lose their interests (20 percent each) in the trust property challenged the new schedule of beneficiaries created by Giroux. They argued that Giroux breached the fiduciary duty she owed to Peixoto. More specifically, they argued she only executed the documents for her personal gain (a 60 percent interest in the trust property). Giroux argued that she had the proper authority to execute the documents as the Peixoto’s attorney-in-fact and that she did so in good faith and in keeping with his wishes.

The Decision

Although the presumption is that an attorney-in-fact does not have the authority to take an action favoring herself because of her fiduciary relationship, this presumption can be overcome. In this case, while the burden of proof switched to Giroux to prove her action was in Peixoto’s best interest, she was able to meet that burden. The court pointed to the fact that Peixoto had the counsel of an independent attorney in the drafting and execution of his estate planning documents. Additionally, Attorney Rogers drafted the specific changes to the trust that were executed by Giroux at Peixoto’s direction. Moreover, the court was persuaded by the fact that the schedule of beneficiaries executed by Giroux was in line with the distribution scheme created in Peixoto’s recently executed will and included individuals who were close to him and listed in a former schedule of beneficiaries.

Ultimately, the court did not find any breach of Giroux’s fiduciary duty or evidence that she forced Peixoto to act contrary to his own wishes because of his actions prior to his becoming incapacitated. The schedule of beneficiaries she executed was deemed to be valid and, therefore, Giroux was entitled to a 60 percent interest in the trust property.

Conclusion

This case demonstrates the importance of appointing someone you trust as your attorney-in-fact in order to take legal and financial steps for you if you ever become incapacitated. It also illustrates the subtlety of the law. Rather than having a clear cut ban on people in fiduciary roles taking actions that benefits themselves, it presumes that they cannot do so, but permits them to overcome that presumption with sufficient evidence of the principal's wishes. Finally, it reflects an interesting inconsistency in the law of estate planning. Your attorney-in-fact cannot change your will which says who will get your property that is in your name alone. However, she can change your trust and even beneficiary designations on retirement and investment accounts. You may have most or all of your assets in such non-probate property not governed by your will.

Topics: Estate Planning, trusts, Probate Estate Administration

Subscribe to New Blog Posts

Recent Posts

Most Popular Posts

Posts by Topic

see all