It is very important to regularly review and update all of your estate planning documents. However, your financial power of attorney is one document that should be reexamined more frequently than others. Revisiting your financial power of attorney will help ensure that the person you have appointed (your agent) is still the person you want to fill that role and that person is willing and able to act as your agent. If you no longer want the same agent, it is crucial to revoke the power of attorney as required by your state’s law while you still have the mental capacity to revoke it. Similarly, if you have been named as someone else’s (the principal’s) agent in a power of attorney, but want to resign from that role, it is essential to take the proper steps to make your resignation effective. Failure to do so could be a costly but avoidable mistake.
An Unfortunate True Story
Stauffer v. IRS,[1] a case recently decided by the First Circuit Court of Appeals, illustrates one of the unfortunate consequences of failing to revoke a power of attorney or resign as agent under a power of attorney. In that case, Carlton Stauffer named his son, Hoff, as his agent under a financial power of attorney. Pursuant to the power of attorney, Hoff was empowered to act on his father’s behalf to manage his financial affairs. After accepting that role, Hoff discovered that Carlton’s girlfriend was spending exorbitant amounts of Carlton’s money and asked Carlton to put her on a monthly allowance to reign in her spending. This triggered a dispute between father and son which led Hoff to tell Carlton that he was no longer willing to act as his agent under the power of attorney. Carlton drafted several revocations of the power of attorney but never sent them to Hoff. In turn, Hoff never validly renounced his role as his father’s agent.
After several years, the two men reconciled, and when Carlton died, Hoff, acting as the personal representative for his estate, filed six years of his father’s tax returns. For one of the earlier tax returns, Hoff claimed there had been an overpayment of $137,403, and on behalf of the estate, sought $97,364 as a refund. The IRS asserted that the claim for a refund was too late, as the statute of limitations had run. Hoff appealed the decision, claiming that his father had a financial disability that should stop the running of the statute of limitations. The Eighth Circuit Court of Appeals held that Hoff, representing his father’s estate, was not entitled to receive the refund because Hoff had been authorized to act on his father’s behalf under the power of attorney, which had never been validly revoked by Carlton or renounced. Hoff’s failure to timely act reduced the size of Carlton’s estate by nearly $100,000.
Make Sure Your Story Has a Different Ending
If you have made someone your agent under a power of attorney, but have changed your mind, ask your estate planning attorney to help you validly revoke the power of attorney under your state’s law, which generally involves the following steps:
(1) Within your revocation, which should state your name, assert that you are of sound mind, and specify in writing that you would like to revoke the power of attorney.
(2) Make sure the revocation specifically identifies the power of attorney you wish to revoke by indicating your full name, the date it was signed, and the full name of the person you named as your agent.
(3) Sign and date the revocation document in front of a notary public and ask for your signature to be notarized.
(4) Send the revocation document to your old agent and to any institution, organization, or agency that has a copy of the power of attorney you are revoking by certified mail, return receipt requested.
Warning: If you fail to notify an institution, agency, or person to which you have provided the power of attorney document about the revocation, and they are unaware that you have revoked it, they will be legally protected if they, in good faith, enter into any transactions with the person you had named as your agent, i.e., they won’t be liable for any losses that result, and you could be held liable for the acts of your agent despite your revocation.
(5) If the power of attorney was recorded, for example, in your county, send the revocation to the relevant county office so it can be recorded as well.
(6) Create a new power of attorney naming a new agent. This is crucial to ensure that your estate plan remains complete and that you are properly taken care of.
(7) Send your new power of attorney designating a new agent to any relevant institutions, agencies, or people by certified mail, return receipt requested.
(8) Keep a copy of the revocation in your records, along with the return receipts.
If you have been named as someone’s agent under a power of attorney, but wish to not serve in that role, ask an experienced estate planning attorney to help you carry out a valid “renunciation” under your state’s law, which may require the following actions:
(1) Check the language of the power of attorney to determine whether it spells out any steps for resigning as an agent. If it does state how the agency should be terminated, carry out those steps.
(2) If the power of attorney does not include instructions for resigning from the role of agent, it is important to provide written notice of your resignation to the person who named you as the agent.
(3) Draft a revocation letter specifying your full name, the full name of the principal who made you an agent under the power of attorney, the date the power of attorney was signed, your intention to resign, and the date your resignation will be effective.
(4) Sign and date your resignation before a notary public and ask that your signature be notarized.
(5) Send your written resignation to the principal by certified mail, return receipt requested.
(6) Send your resignation to any institutions, organizations, or agencies that have been given copies of the power of attorney by certified mail, return receipt requested.
(7) Keep a copy of the resignation in your records, along with the return receipts.
We Can Help
Young or old, it is important to name someone you trust to act on your behalf in case you one day become too ill or are otherwise unable to make financial or medical decisions for yourself. But once you have made your choices, you should revisit your powers of attorney frequently to make sure that the person you have named as your agent is still the person you want to make those important decisions. It is also crucial to revoke a previous power of attorney and create a new one if you have gotten married or divorced, moved to another state, or have lost the power of attorney document. In any of these situations, a legally valid revocation is crucial to prevent avoidable loss and heartache. Similarly, those who have been named as an agent under a power of attorney but are no longer willing or able to act in that role must resign in the manner specified by the power of attorney document or state law. Failing to do so could lead to confusion and unnecessary expenses. Call us today to set up a meeting so we can help ensure that your story has a happy ending.
[1] 939 F.3d 1 (1st Cir. 2019).
It is very important to regularly review and update all of your estate planning documents. However, your financial power of attorney is one document that should be reexamined more frequently than others. Revisiting your financial power of attorney will help ensure that the person you have appointed (your agent) is still the person you want to fill that role and that person is willing and able to act as your agent. If you no longer want the same agent, it is crucial to revoke the power of attorney as required by your state’s law while you still have the mental capacity to revoke it. Similarly, if you have been named as someone else’s (the principal’s) agent in a power of attorney, but want to resign from that role, it is essential to take the proper steps to make your resignation effective. Failure to do so could be a costly but avoidable mistake.
An Unfortunate True Story
Stauffer v. IRS,[1] a case recently decided by the First Circuit Court of Appeals, illustrates one of the unfortunate consequences of failing to revoke a power of attorney or resign as agent under a power of attorney. In that case, Carlton Stauffer named his son, Hoff, as his agent under a financial power of attorney. Pursuant to the power of attorney, Hoff was empowered to act on his father’s behalf to manage his financial affairs. After accepting that role, Hoff discovered that Carlton’s girlfriend was spending exorbitant amounts of Carlton’s money and asked Carlton to put her on a monthly allowance to reign in her spending. This triggered a dispute between father and son which led Hoff to tell Carlton that he was no longer willing to act as his agent under the power of attorney. Carlton drafted several revocations of the power of attorney but never sent them to Hoff. In turn, Hoff never validly renounced his role as his father’s agent.
After several years, the two men reconciled, and when Carlton died, Hoff, acting as the personal representative for his estate, filed six years of his father’s tax returns. For one of the earlier tax returns, Hoff claimed there had been an overpayment of $137,403, and on behalf of the estate, sought $97,364 as a refund. The IRS asserted that the claim for a refund was too late, as the statute of limitations had run. Hoff appealed the decision, claiming that his father had a financial disability that should stop the running of the statute of limitations. The Eighth Circuit Court of Appeals held that Hoff, representing his father’s estate, was not entitled to receive the refund because Hoff had been authorized to act on his father’s behalf under the power of attorney, which had never been validly revoked by Carlton or renounced. Hoff’s failure to timely act reduced the size of Carlton’s estate by nearly $100,000.
Make Sure Your Story Has a Different Ending
If you have made someone your agent under a power of attorney, but have changed your mind, ask your estate planning attorney to help you validly revoke the power of attorney under your state’s law, which generally involves the following steps:
(1) Within your revocation, which should state your name, assert that you are of sound mind, and specify in writing that you would like to revoke the power of attorney.
(2) Make sure the revocation specifically identifies the power of attorney you wish to revoke by indicating your full name, the date it was signed, and the full name of the person you named as your agent.
(3) Sign and date the revocation document in front of a notary public and ask for your signature to be notarized.
(4) Send the revocation document to your old agent and to any institution, organization, or agency that has a copy of the power of attorney you are revoking by certified mail, return receipt requested.
Warning: If you fail to notify an institution, agency, or person to which you have provided the power of attorney document about the revocation, and they are unaware that you have revoked it, they will be legally protected if they, in good faith, enter into any transactions with the person you had named as your agent, i.e., they won’t be liable for any losses that result, and you could be held liable for the acts of your agent despite your revocation.
(5) If the power of attorney was recorded, for example, in your county, send the revocation to the relevant county office so it can be recorded as well.
(6) Create a new power of attorney naming a new agent. This is crucial to ensure that your estate plan remains complete and that you are properly taken care of.
(7) Send your new power of attorney designating a new agent to any relevant institutions, agencies, or people by certified mail, return receipt requested.
(8) Keep a copy of the revocation in your records, along with the return receipts.
If you have been named as someone’s agent under a power of attorney, but wish to not serve in that role, ask an experienced estate planning attorney to help you carry out a valid “renunciation” under your state’s law, which may require the following actions:
(1) Check the language of the power of attorney to determine whether it spells out any steps for resigning as an agent. If it does state how the agency should be terminated, carry out those steps.
(2) If the power of attorney does not include instructions for resigning from the role of agent, it is important to provide written notice of your resignation to the person who named you as the agent.
(3) Draft a revocation letter specifying your full name, the full name of the principal who made you an agent under the power of attorney, the date the power of attorney was signed, your intention to resign, and the date your resignation will be effective.
(4) Sign and date your resignation before a notary public and ask that your signature be notarized.
(5) Send your written resignation to the principal by certified mail, return receipt requested.
(6) Send your resignation to any institutions, organizations, or agencies that have been given copies of the power of attorney by certified mail, return receipt requested.
(7) Keep a copy of the resignation in your records, along with the return receipts.
We Can Help
Young or old, it is important to name someone you trust to act on your behalf in case you one day become too ill or are otherwise unable to make financial or medical decisions for yourself. But once you have made your choices, you should revisit your powers of attorney frequently to make sure that the person you have named as your agent is still the person you want to make those important decisions. It is also crucial to revoke a previous power of attorney and create a new one if you have gotten married or divorced, moved to another state, or have lost the power of attorney document. In any of these situations, a legally valid revocation is crucial to prevent avoidable loss and heartache. Similarly, those who have been named as an agent under a power of attorney but are no longer willing or able to act in that role must resign in the manner specified by the power of attorney document or state law. Failing to do so could lead to confusion and unnecessary expenses. Call us today to set up a meeting so we can help ensure that your story has a happy ending.