In 2008 lawyer Holmes assisted Svaldi, a wealthy 93-year- old client, by preparing a standard power of attorney granting J and E who managed the apartment where he lived the authority to manage, sell, and transfer his assets and to open and close bank accounts and sign checks on his behalf. In an effort to protect Svaldi, Holmes modified the POA by adding these two provisions:
- The holder of this Power-of-Attorney shall within thirty (30) days of appointment, or as soon thereafter as possible make an inventory of my estate assets and list any claims or obligations which I have or may have, giving me a copy, keeping a copy for herself, and leaving a copy with my attorney, Robert D. Holmes ....
- The holder shall also file an annual account by January 31st of each year and deliver it to Robert D. Holmes, attorney, or any attorney licensed in Ohio, designated by me or by the holder of this Power-of- Attorney for safe-keeping.
J and E did none of these things even after Holmes in 2008 sent a letter to J reminding her of her obligation to comply with these requirements. Holmes made no other follow-up effort to obtain compliance. In 2011 large withdrawals from Svaldi’s bank account prompted the bank to notify the police. Investigation revealed that over $800,000 was stolen by J and E.
Svaldi then sued Holmes for malpractice claiming that by including the inventory and annual accounting requirements in the POA, Holmes assumed a duty to monitor compliance. Holmes defended by arguing that his only duty to Svaldi regarding the POA was to prepare it competently and with due care. Holmes was granted summary judgment by the trial court, but the Ohio Court of Appeals reversed this decision.
In its decision the Court wrote:
The expert witnesses of both parties testified that provisions such as paragraphs 10 and 11 do not typically appear in powers of attorney. Holmes explained that he incorporated the inventory and accounting scheme into Svaldi’s power of attorney because the designated agents were not Svaldi’s relatives and, thus, lacked a familial duty to act in Svaldi’s best interests. To protect Svaldi, Holmes sought to create transparency about the amount of Svaldi’s assets at the origination of the power of attorney and the subsequent expenditure of those assets by Svaldi’s agents.
We conclude that, by incorporating the inventory and accounting scheme into the power of attorney, Holmes expanded the scope of his representation of Svaldi beyond the mere drafting of legal documents. By setting up the inventory and accounting scheme, Holmes assumed a responsibility to attempt to make it work. Thus, Holmes had a duty to follow up with [J and E] regarding their obligation to complete an inventory and the annual accountings and encourage [J and E] to comply with the scheme.
Risk Management Considerations
- Modifying a standard legal form such as a POA with a well understood scope of the preparing lawyer’s duties must be done with extra care and appreciation for the implications to the lawyer’s scope of engagement. Holmes’ modification of Svaldi’s POA, well intended as it was, is ambivalent on how the added terms were to be managed. In a malpractice claim a lawyer will never get the benefit of the doubt in these circumstances.
- Holmes’ problem was exacerbated by the fact of Svaldi’s extreme old age. Risk management of older adult representations involves the recognition of the enhanced professional responsibility duties lawyers owe older adults. In these representations a lawyer often needs to go much further than in other similar representations to assure that the older adult client is protected from family, friends, business people, and scammers. While not explicit in the Court’s decision, it is not much of an extrapolation to conclude that Svaldi’s 93 years factored significantly on the protection the Court saw fit to give him.
- The May 2013 issue of the KBA Bench & Bar Magazine includes the article Kentucky Powers Of Attorney: A Necessary Planning Tool For End Of Life, by Kenton, Dougherty, McClelland, and McFarlin. In addition to being an excellent substantive treatment of POAs, it is something of a risk management bible for avoiding malpractice when preparing a POA for an elderly client. It covers numerous POA considerations for elderly clients including the specificity required for powers granted to the agent, choice of agent, authority to gift real estate and other assets, and Medicaid planning. We urge you to read this article and place a copy in your POA file for ready reference whenever drafting a POA.