Fiduciary litigation can get very tangled. In Kosmann v. Brown, decided July 23, 2024, the Virginia Court of Appeals addressed a case where a principal (“Brown”) signed on the same day a power of attorney and a revocable trust which gave certain authority over the trust to the holder agent under the power of attorney (“Monroe”). After Brown became incapacitated, Monroe signed an amendment to the trust under the putative authority of the power of attorney cutting out the other beneficiaries in favor of herself, changing the successor trustees, and making the trust irrevocable so the changes would be permanent.
The Loudoun County Circuit Court resolved the matter before trial on purely legal grounds, determining that the action taken was outside the authority granted by the trust to an attorney-in-fact, and the Virginia Court of Appeals has now affirmed this finding. To reach this conclusion, the Court looked in detail at the exact language of the trust and of the power of attorney and took a deep dive into the definitions built into Virginia’s versions of the Uniform Trust Code, the Uniform Powers of Appointment Act, and the Uniform Power of Attorney Act.
The Court pointed to a few general things: (1) the trust instrument controls over a power of attorney as to whether the power of attorney can be used to change the trust, (2) an attorney-in-fact is limited to the grant of authority in the power of attorney even if the trust would otherwise allow an action, and (3) a court will look to who the ‘powerholder’ is in determining whether a power of appointment has been exercised.
The Court also included a veiled warning to the parties - if this matter were to go back for trial, the validity of the trust amendment would still hinge on the factual question of whether the attorney-in-fact acted within the expectations of the principal, in the best interests of the principal, and in good faith.
All of those are important points for fiduciary administration and litigation. For estate planning, this decision underscores the importance of the administrative ‘boilerplate’ language in your documents. The Court’s result hinged on the trust’s prohibition on an attorney-in-fact exercising a power of appointment, but the finding could have been very different if the language was broader or more narrow.
Your estate planning attorney can assess what is important or helpful for your circumstances and draft or make changes to your documents as appropriate. In my practice, I frequently customize documents for a client’s specific situation. It might be to avoid a foreseeable conflict; add extra instructions particular to a complicated asset; or give a fiduciary flexibility for changes in circumstances which may arise far in the future. You should regularly review the terms of your documents, and whether they make sense with the people in your life, because you know them better than your attorney does. Talking through your questions with an experienced estate planning attorney will help make sure the documents you have in place work out the way you intend.
Virginia attorney Jonathan A. Nelson uses his extensive legal knowledge and trial experience to resolve conflicts, negotiate settlements, navigate compliance matters, and vigorously advocate in the courtroom in order to achieve the best possible outcomes for his clients. He practices in estate planning, probate, trust and estate administration, corporate law, and civil litigation related to these fields.
The attorneys of Smith Pugh & Nelson, PLC, offer the experienced counsel, personal attention, and customized legal services needed to address the many complex issues surrounding estate planning, probate, and trust administration. Contact us at (703) 777-6084 to schedule a consultation.