We have often been asked to advise the fiduciaries appointed by estate planning clients about their legal duties. An agent under a power of attorney has a legal duty to take actions for the principal the way the principal would do for themselves, and not to “self-deal” with the principal’s assets in ways that benefit the agent against the wishes or practices of the principal. A trustee has the duty to administer the trust as written, with loyalty to the beneficiary(ies) of the trust and their best interest, and not to engage in self-dealing with trust assets. As pointed out in a recent case, it is imperative to select trustworthy agents and trustees who will adhere to these duties.
John Michael Garner executed several estate planning documents in 2001, including a trust and a durable general power of attorney (DGPOA). John named the University of Texas at Austin and several charities as the remainder beneficiaries of the trust. John nominated his nephew, Michael Garner, as successor trustee of the trust and as attorney-in-fact in the DGPOA. John and Michael had had extremely limited contact over many years, and Michael was a 21-year-old college student at the time he was appointed. The DGPOA gave Michael, as attorney-in-fact, the authority to conduct “estate planning,” including the authority to amend John’s trust. The DGPOA exculpated the attorney-in-fact from liability for actions taken related to John’s estate plan. In August 2020, John was declared incapacitated as a result of acute encephalopathy. It was around that time that Michael first became aware that he was nominated as John’s attorney-in-fact and successor trustee of his trust. Around December 7, 2020, John suffered a series of strokes. Michael did not communicate with John after this point and never attempted to communicate with John about his estate plan.
On December 23, 2020, Michael, acting as John’s attorney-in-fact, executed an amendment to John’s trust which removed the existing remainder beneficiaries and instead named Michael as the remainder beneficiary of the trust. Michael did not discuss the amendment with John. John died on January 5, 2021. Thereafter, Michael filed a petition with the probate court seeking an abbreviated and unsupervised administration of John’s estate. The superior court denied the petition because it did not identify the charitable beneficiaries as interested persons. In June 2021, Michael sought a declaratory judgment as to the efficacy of the amendment he executed. The parties filed cross motions for summary judgment and the trial court granted summary judgment in favor of the charitable beneficiaries because Michael breached his fiduciary duties as trustee and as attorney-in-fact and that Michael executed the amendment in bad faith and the exculpatory clause was thus unenforceable. Michael appealed, arguing he acted within the scope of his express authority under the DGPOA in amending the trust.
The appellate court affirmed the trial court’s ruling, finding that the common law imposes on attorneys-in-fact an external, non-waivable duty to act in good faith, in the principal’s best interest, and within the scope of the authority granted by the principal and that Michael presented no evidence that he had any reason to believe John would have wanted any amendment to the trust. John retained the ability to amend his trust and could have done so at any time before he became incapacitated.