The Bench & Bar magazine is published to provide members of the KBA with information that will increase their knowledge of the law, improve the practice of law, and assist in improving the quality of legal services for the citizenry.
Issue link: https://kentuckybenchandbar.epubxp.com/i/132126
FEATURE: KENTUCKY'S ELDER LAW affected by subsequent disability or incapacity of the principal, or lapse of time." EXTENT OF POWERS GRANTED The importance of addressing specific powers in the power of attorney instrument was illustrated by the Kentucky Supreme Court's holding last August when it ruled in Donna Ping, executrix of the estate of Alma Calhoun Duncan, deceased v. Beverly Enterprises, Inc., et al., 5 that an agent could only exercise powers specifically enumerated by the principal. In Ping, the plaintiff filed suit alleging negligence by the defendants in providing long term care to her mother, Duncan. The defendants attempted to assert Ping had no right to bring suit as she had executed an agreement, as agent on behalf of Duncan, to take disputes to arbitration. Prior to Duncan's admission to the nursing home, she executed a general durable power of attorney in favor of Ping which listed specific powers and stated that Ping was authorized to generally do any and every further act and thing of whatever kind, nature or type required to be done on Duncan's behalf. The power of attorney instrument also stated that the enumeration of specific items, rights, acts or powers did not limit or restrict the general and full power granted to Ping. 6 The Kentucky Supreme Court found that Ping lacked the actual authority to bind Duncan to the arbitration agreement. The court held that the power of attorney document must specifically grant that authority to the attorney in fact. The court rejected Ping's claim that Duncan's intent to grant a broad scope of authority was indicated by the general language: "Rather, we have indicated that an agent's authority under a power of attorney is to be construed with reference to the types of transactions expressly authorized in the document" 7(emphasis added). The court went on to note that the power of attorney applied to decisions reasonably necessary to maintain Duncan's property, finances and medical care. 8 18 Of great significance to the court was its characterization that signing a mediation agreement waived a principal's right to seek redress in a court of law. Such a power would need to be specifically enumerated in the power of attorney document for its exercise to be valid. Based upon the court's language in Ping, specific language needs to authorize or prohibit the actions taken by the attorney in fact. B&B; • 05.13 To address the specific issue in Ping, a practitioner might consider adding a provision in the power of attorney document authorizing the initiation and defense of law suits. For example, "to defend all actions and suits which shall be commenced against me and to compromise, settle and adjust all actions, accounts, dues and demands in such manner as my said attorney-in-fact shall deem appropriate." To ensure that there is no misunderstanding about the rights of the principal to have access to the courts, the power of attorney might state that "this grant of authority does not give my agent the right to waive my constitutional right to a court of law." CHOICE OF AGENT Clients often choose the oldest child or the youngest child or the child who lives closest to them. Part of an attorney's job is to help the client to choose the most appropriate person as agent. In our electronic age, the attorney in fact does not have to live in the principal's community to manage the checking account. On-line banking allows a child in Oregon to pay bills for a parent living in Kentucky. Discuss these issues with the client. It is advisable whenever possible to appoint an alternate attorney-in-fact in case the first named agent is unable or unwilling to serve. In those situations where powers of attorney are being drafted for an elderly couple, the initial appointment may be the capable spouse but an alternate appointment may be crucial to prevent the need for guardianship when the competent spouse dies unexpectedly leaving a spouse with dementia with no alternative agent. The instrument may name multiple co-agents with independent authority, "acting jointly or individually as the case may require." 9 ACCOUNTABILITY OF AGENT TO PRINCIPAL Kentucky does not have a comprehensive power of attorney statute which addresses the issues of agent/attorney in fact accountability and liability. The attorney in fact is deemed a fiduciary under Kentucky case law but not by statute. 10 The authors believe that to curb financial abuse of the elderly, Kentucky agents should be statutorily classified as fiduciaries. GIFTS UNDER POWERS OF ATTORNEY Both the power to transfer real estate and the power to gift are provided for by Kentucky statutes. KRS 386.093 was amended in 2000 to state in relevant part that "a durable power of attorney may authorize an attorney-in-fact to make a gift of the principle's real or personal property to the attorney-infact or to others if the intent of the principle to do so is unambiguously stated on the face of the instrument." 11 Shortly after that amendment, the Court of Appeals in Ingram v. Cates 12 upheld the ruling in Wabner v. Black 13 that an agent using "utmost good faith" could make gifts under a power of attorney if there was no specific provision. The Ingram case involved a power of attorney drafted prior to the 2000 statutory amendment, requiring express permission for an agent to make gifts. 14 Many elder law attorneys believe that KRS 386.093 mandates that a written authorization include the following language: "The power to make gifts of my real or personal property or my interest in such property to my agent, children and grandchildren, including any child or grandchild of mine who may be acting as my attorney-in-fact, in such manner as my attorney-in-fact deems appropriate, including, but not limited to, outright gifts, gifts in trust, or gifts to a custodian under a uniform gifts or transfers to minors act, if, in the opinion of my attorney-in-fact, such gifts are advisable." Some Kentucky attorneys counsel against gifting clauses because of the potential for exploitation by the agent. This concern is valid and raises an important consideration. This selection should be done carefully. If gifting is unwise, completely eliminate the provision. GIFTING IN THE MEDICAID CONTEXT Another important area where specifically stated powers are essential relates to asset preservation or Medicaid planning. For aging clients, Medicaid may be a vital consideration because it is the primary source of payment for long term nursing home care. Without a gifting clause in a power of attorney, the only available alternative for a Medicaid applicant to preserve her estate is to subject the principal to guardianship proceedings and petition the court for permission to gift. 15 A practitioner should be knowledgeable enough to understand the effect of gifting in the Medicaid context and have a conversation with his/her client about the consequences of gifting in relationship to gift taxes and the effect gifting has on Medicaid eligibility. Many clients are familiar with the federal annual gift limits. Many power of at-