Posted: July 30, 2010

Although modern medicine has greatly lengthened the average lifespan, it also has created situations where more people spend a longer period of time in an incapacitated state prior to death. An adult who is unable to handle and manage his or her finances must be assisted by an agent or fiduciary of some type. If the incapacitated adult executed a power of attorney prior to the incapacity, the agent named in the power of attorney will be able to act on behalf of the incapacitated individual. However, if there is no power of attorney, a family member or other interested party must petition the court for appointment of a guardian and/or conservator.

Unfortunately, sometimes a family member who is serving as the agent under a power of attorney, mishandles or misappropriates the incapacitated adult's assets. If other family members realize the misconduct is occurring, they may file a petition in court to terminate the authority under the power of attorney and appoint a different person as the conservator.

Under the new Uniform Power of Attorney Act, which became effective on July 1, an agent under a power of attorney has a duty to keep records of all receipts, disbursements and other transactions and to disclose them upon request. The list of who can request and receive information about the agent's conduct includes the incapacitated adult, a guardian, a conservator, a person authorized to make health care decisions for the person, a spouse, parent or descendant, an adult sibling or niece or nephew, a person named as a beneficiary in the estate, adult protective services, the principal's caregiver and anyone asked to accept the authority of the agent under the power of attorney. All of these parties also have standing to petition a court to review the agent's conduct and, if necessary, remove the agent under the power of attorney and appoint a conservator.

Conservatorship litigation is filed in the circuit court where the incapacitated adult resides. The petition includes information about the incapacitated adult and his or her health condition and names and addresses of certain family members including the spouse, adult children, parents and adult siblings. All fiduciaries representing the incapacitated adult and family members are entitled to receive notice of the litigation.

A guardian ad litem - an independent attorney - is always appointed by the court to represent the interests of the incapacitated adult. The guardian ad litem will visit and interview the incapacitated adult and attempt to advise him or her of the nature of the proceedings and will file a report with the court addressing whether the incapacitated adult needs a guardian and/or conservator and whether the proposed or existing fiduciary is suitable to serve. Sometimes the incapacitated adult also employs separate counsel, particularly if the adult is contesting his or her incapacity. A medical evaluation of the incapacitated adult is required to be conducted, which must detail the type of incapacity and the limitations on independent living.

Pretrial discovery for such proceedings can be just as comprehensive as with any other litigation, especially when the petitioner is concerned that assets of the incapacitated adult have been misappropriated. Such discovery may require the disclosure and production of all of the incapacitated adult's assets and affairs including bank and brokerage account statements, credit card statements, income tax returns, copies of wills and trusts, lists of beneficiaries named on accounts, certificates of deposit, retirement accounts and life insurance, credit reports, deeds to real property, all documents related to lifetime gifts, list of safe deposit boxes and their contents, and any other relevant documentation. When a court considers the appointment of a conservator, the conservator may have broad or limited authority. The court also has the power to address previous inappropriate transactions conducted by an agent under a power of attorney or any other person who had access to the incapacitated adult's funds.

Litigation of this nature can be expensive, intrusive and emotionally challenging for a family. However, if an agent under a power of attorney is misappropriating assets of an incapacitated adult, frequently the only avenue for complete relief is through the court system.

Lawrence G. Cumming, managing partner of the Hampton office of Kaufman & Canoles, can be reached at 224-2910.