A power of attorney (“POA”) allows a principal to assign their agent authority to make certain legal and financial decisions on their behalf. Because a POA can give an agent tremendous power over the principal’s affairs, claims of elder abuse in connection with a POA are common. While litigation concerning claims of abuse of a POA often occurs in the context of contested probate proceedings, special proceedings under Mental Hygiene Law (“MHL”) Article 81 (“Article 81”) and the General Obligations Law (“GOL”) increasingly involve claims that an agent is abusing a POA. This post delves into the options available under the MHL and GOL when one suspects abuse of a POA.

Advanced Directives in Guardianship Litigation. Because a guardianship under MHL Article 81 puts the alleged incapacitated person’s (“AIP”) constitutionally protected civil liberties at stake, the goal of Article 81 is to safeguard the AIP and further their best interests using the least restrictive form of intervention (see Matter of Samuel S. (Helene S.), 96 AD3d 954, 957-958 [2d Dept 2012]). Advanced directives, such as a POA or a health care proxy, being less restrictive than an Article 81 guardianship, often eliminate the need for one (see Matter of Isadora R., 5 AD3d 494 [2d Dept 2004]). Yet to obviate the need for guardianship, the advanced directive(s) must be working effectively, and the agent must have acted in the AIP’s best interests (see Matter of Rachel Z. (Jack Z.–Anna B.), 181 AD3d 805 [2d Dept 2020]).

 Appointing a guardian requires a two-pronged determination by clear and convincing evidence. First, that a guardian is “necessary to provide for the personal needs of that person, including food, clothing, shelter, health care, or safety and/or to manage the property and financial affairs of that person,” and second, that the AIP is either incapacitated or consents to the appointment of a guardian (MHL § 81.02[a][1] and [2]; see also Matter of Carole L., 136 AD3d 917 [2d Dept 2016])).  Even if the AIP is cognitively impaired, guardianship may not be necessary if the agent acts in the principal/AIP’s best interest to assist them with their activities of daily living (e.g., cooking, cleaning, bill paying).

Once the Court appoints a guardian, it has discretion under MHL § 81.29(d) to revoke a POA if the principal was incapacitated when the POA was executed or the agent breached their fiduciary duty (MHL § 81.29[d]). In a publicized case, Matter of Goldfein v Kohler, Paulette Kohler’s building manager filed a petition to appoint a temporary guardian for her. NBC New York reported that the petition alleged the agent, under a POA and health care proxy, engaged in elder abuse and was the subject of a criminal investigation. The Supreme Court revoked the advanced directives. But on appeal, the First Department found no evidence of financial impropriety by the agent or that Ms. Kohler lacked capacity when she executed her advanced directives (Matter of Goldfein v Kohler, 221 AD3d 500 [1st Dept 2023]). The Court even noted that building staff (the staff of the same building that commenced the guardianship proceeding) impeded the agent’s efforts to repair Ms. Kohler’s apartment. So the First Department reversed and reinstated Ms. Kohler’s advanced directives. The Court found it significant that the AIP “unequivocally expressed her wishes to have [the agent] care for her.” Indeed, MHL § 81.19(c) requires the Court to appoint a person nominated by the AIP unless the Court “determines such appointment is not appropriate” (MHL § 81.19[c]; see Matter of Audrey D., 48 AD3d 806 [2d Dept 2008]).

If the AIP does not nominate a guardian, Courts tend to prefer a family member as guardian (see Matter of Corinne S. (Steven S.), ___Misc 3d___, 2023 NY Slip Op 23416 [2023]). This has led to interesting results. For example, in Matter of Cox, the AIP executed a POA appointing one of her daughters as agent (Matter of Cox, 47 Misc 3d 1211[A], 2015 NY Slip Op 50550[U] [Sup Ct, Kings County 2015]). That daughter’s failure to properly account concerned some of her other siblings, who accused her of stealing from their mother. The Supreme Court found that the daughter failed to account as agent accurately and comingled her own funds with her mother’s, and therefore vacated the POA and health care proxy. But while the Court revoked the advanced directives, they appointed the same daughter as the AIP’s personal needs and property guardian. The Court determined that although the former agent breached her fiduciary duty, being a nurse best equipped her to provide for her mother’s personal needs, and her earlier actions were not “willful, intentional, or harmful” to her mother.

In Matter of Loftman (Mae R.), the Supreme Court did not revoke the advanced directives (Matter of Loftman (Mae R.), 123 AD3d 1034 [2nd Dept. 2014]). In a fact pattern all too familiar to estate and guardianship litigators, a neighbor insinuated themselves into Mae R.’s life. Mae R. told witnesses that the neighbor “makes me say things I don’t mean and then I forget.” Yet the Court dismissed the petition to appoint a guardian against the Court Evaluator’s recommendation, finding that the petitioner had not proven the AIP’s incapacity by clear and convincing evidence. The Court even directed the petitioner to pay the legal fees of the Court appointees. But the Second Department reversed, holding that there was clear and convincing evidence of Mae R.’s incapacity. Although the 91-year-old executed a POA, health care proxy, and will favoring her neighbor, that same neighbor procured the attorney who drafted those documents. Mae R. also told the Court Evaluator that she did not recall executing any will or advanced directives and, critically, that she wished to leave her estate to her family ¾ not the neighbor.

After the Court appoints a guardian and revokes a POA, MHL § 81.29(d) provides that the attorney-in-fact must account to the guardian (MHL § 81.29[d]; see also Matter of Walter K.H., 31 Misc 3d 1233[A], 1233A, 2011 NY Slip Op 50969[U], *5 [Sup Ct, Erie County 2011]). In Matter of Walter K.H., the AIP’s son accused his sister of malfeasance as agent for their mother. Although the agent was an attorney, she failed to keep a “record of all receipts, disbursements, and transactions” as required by GOL § 1505(2)(a)(3). Making matters worse, the Court found the agent made improper gifts and used her mother’s car for five years, even paying for registration, insurance, gasoline, maintenance, and repairs from her mother’s assets. So the Court directed the former agent to “account to the guardian for all income, assets, expenditures and debts, and shall promptly reimburse the guardian for all expenditures made in breach of her fiduciary.” As is common in contested guardianships with animosity among family members, the Court appointed an independent guardian.

In Mary XX, the Third Department explained that a guardian could compel an accounting from an agent when four factors exist: (i) a fiduciary relationship, (ii) entrustment of money or property, (iii) no other remedy, and (iv) a demand and refusal of an accounting (Matter of Mary XX., 33 AD3d 1066 [3d Dept 2006]). There, a personal needs guardian had the right to an accounting from a trustee that held the ward’s property in trust because the personal needs guardian had a duty to ensure they met the ward’s living and support needs. The Court reasoned that a guardian must be able to fulfill their duties and have the power to demand an accounting when their ward has a right to such action.

Finally, the guardian can compel an accounting from the former holder of a POA under MHL § 81.43 (see Matter Kent, 188 Misc 2d 509 [Sup Ct, Dutchess County 2001]).[1]

Relief Available under the General Obligations Law. If one suspects abuse of a POA, New York’s General Obligations Law also provides an effective vehicle to obtain information. GOL § 5- 1505 requires an agent to produce a “record of all receipts, disbursements, and transactions entered into by the agent” within 15 days of a written request. But, practically speaking,[2] the statute limits standing to make that written request to (i) the principal, (ii) a monitor, (iii) a co-agent, or (iv) a successor agent (see GOL§ 5-1505[3][a]).

Also, GOL § 5-1510 provides for special proceedings when one suspects abuse of a POA. A non-comprehensive list of relief available under GOL § 5-1510 includes:

• Compelling the production of the agent’s records of transactions.
• Determining the validity of the POA.
• Removal of the agent.
• Determining whether the agent is entitled to compensation and whether such compensation received is reasonable.

(GOL § 5-1510[2]).

The statute also limits standing to commence a special proceeding under GOL § 5-1510(2) to those listed in GOL§ 5-1505[3][a], plus “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” (GOL § 5-1510[3]).

For those with standing, the GOL presents several viable alternatives to guardianship to obtain information and stop the abuse of a POA.

[1] Keep an eye out for a post on turnover proceedings under MHL § 81.43.

[2] Although the statute provides standing for Government agencies investigating allegations of financial exploitation/abuse, court evaluators in MHL Article 81 proceedings, Guardians ad Litem in a Surrogate’s Court proceeding, guardian/conservator of the estate of the principal, a personal representative of the estate of a deceased principal, this does not offer relief for most people looking to investigate/prevent financial abuse.

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