Two people can override a power of attorney: the principal, while the principal still has capacity, and the court, once the principal has lost it.
A power of attorney is a document signed by the principal that authorizes an agent to act for the principal in certain transactions. A principal with capacity overrides it by revoking it, either with a separate instrument of revocation or with a new power of attorney that expressly revokes the earlier one. When the principal no longer has capacity, only the court can override it. Under Mental Hygiene Law § 81.29(d), the court can modify, amend or revoke a power of attorney of an incapacitated person if it finds that the document was made while the principal was already incapacitated or that the agent breached his fiduciary duties.
A power of attorney also comes to an end on its own in four situations: the period it was limited to expires, the principal or the agent dies, the one transaction it was drawn for is completed, or the agent resigns.
Revocation by the Principal
A principal who still has capacity can revoke a power of attorney by signing an instrument of revocation or a new power of attorney that expressly revokes the old one. The revocation must be executed with the same formalities as a power of attorney: two witnesses and an acknowledgment before a notary public.
Signing the revocation is not enough by itself. The revocation has to be delivered to the agent and to the banks, brokerages and other third parties who have been relying on the old document. A third party who has not been told of the revocation can continue to honor the old power of attorney, and the revocation will not be effective as to that third party.
When the revocation is delivered to the former agent, the principal should ask for the original power of attorney back, so that the former agent cannot keep presenting it, and should then destroy it. If the principal has lost capacity, none of this is available, and the only route is court intervention.
Court Intervention
Once the principal has lost capacity, for example through dementia or another condition affecting the mind, the principal can no longer revoke the document, and only the court can override it. Under MHL § 81.29(d) the court may do so in only two situations: where the power of attorney was executed at a time when the principal did not have capacity, or where the agent has breached his fiduciary duties.
In practice the request to override the power of attorney is usually made in the same petition that asks the court to appoint a guardian of the property of the incapacitated person. The guardianship petition brings the principal’s finances before the court, and the court can then decide whether the agent should continue to act at all.
Other Ways a Power of Attorney Ends
Apart from revocation and a court order, a power of attorney terminates when its period expires, when the principal or the agent dies, when the transaction it was limited to is completed, or when the agent resigns.
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Expiration of a Period or Completion of a Transaction
Some powers of attorney are limited to a period of time or to a single transaction. A limited period is typical when the principal will be out of the country and needs someone to manage his property while he is away; when the end date arrives, the document expires without any action by the principal. A single-transaction power of attorney authorizes the agent to act on one matter only, for example the sale of a particular piece of real property described in the document. Once the agent completes that sale, the power of attorney terminates because the only purpose for which it was signed has been fulfilled.
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Death of the Principal or Agent
The agent can only do what the principal could do. When the principal dies, the principal can no longer act, and so the agent can no longer act under the power of attorney either.
When the agent dies, the power of attorney ceases to be effective unless the principal named a successor or substitute agent in the document. The authority given in a power of attorney is personal to the relationship between the principal and the agent. The agent cannot pass it to someone else, and it does not pass to the agent’s estate. Only the principal can grant authority under a power of attorney.
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Resignation of the Agent
The same principle applies when the agent resigns. The agent cannot hand the authority to someone else, so the resignation ends the principal-agent relationship under the document, again unless a successor agent was named.
In every one of these situations, third parties who relied on the power of attorney must be given notice of the termination for it to be effective against them. A third party who acts without notice of the termination cannot be held liable for damages arising from it.
Overriding a power of attorney, especially when the principal is incapacitated, is guardianship work. If you are a family member who believes an agent is misusing a power of attorney, or an agent who has been accused of it, we can help. Call us at 212-233-1233 or email [email protected].
