A power of attorney is a document that authorizes an individual to act on another person’s behalf. The party who is appointed (the agent) is usually permitted to act on behalf of the grantor of the power (the principal) for as long as the grantor is alive. The agent has a fiduciary obligation to act in the best interests of the principal. To ensure compliance, the agent may be required to provide an accounting, which is a detailed report of the financial actions the agent took. Who has the right to compel an accounting under New York law was clarified in a recent decision of the New York Appellate Division, Fourth Department.
New York General Obligations Law (GOL) 5-1510 provides that certain parties with the requisite level of interest in the grantor’s affairs (i.e., those with “standing”) have the right to request an accounting from the agent. The Court in Lange v. Dixson addressed a dispute over who has standing to request an accounting after the principal has died. The case involved a mother who had granted her daughter power of attorney. After the mother’s death, the decedent’s son filed a proceeding in Surrogate’s Court to compel his sister to account for the time she was acting as agent for their mother. The sister moved to dismiss the petition on the grounds that her brother was not the personal representative of their mother’s estate, claiming that since the principal died, the only person with standing to seek an accounting was the estate’s personal representative. The lower court agreed and dismissed the petition for an accounting. The brother appealed.
The Appellate Court reversed the lower court’s decision, finding that the Surrogate had not considered GOL section 5-1510 (3) in determining the standing of the decedent’s son. The decision noted that although GOL section 5-1505(2) (a) (3) (vii) entitled the personal representative of the decedent’s estate to seek an accounting, section 5-1510(3) still applied despite the grantor’s death. That section allows other parties to compel an accounting, including the child of the principal. The statute provides:
3. A special proceeding may be commenced pursuant to subdivision two of this section by any person identified in subparagraph three of paragraph (a) of subdivision two of section 5-1505 of this title, the agent, the spouse, child or parent of the principal, the principal’s successor in interest, or any third party who may be required to accept a power of attorney. (emphasis supplied).
The Fourth Department found that the reference to 5-1505 (2) (a) (3) and the use of the words “any” and “or” means that the legislature intended to authorize “equal but alternative” parties to seek to make the agent account for its conduct. The Court determined that to accept the lower court’s conclusion “would directly contravene the plain language of the statute.” Accordingly, the decision of the lower court was reversed, and the brother’s petition was reinstated.
The lesson here is that an agent pursuant to a power of attorney must be prepared to account for any action taken on behalf of the party to whom a fiduciary duty is owed.
Should you have any questions regarding appointing or being appointed as a power of attorney or what rights and obligations such an appointment creates, please contact one of our estate attorneys.