New York Estate Planning & Elder Law Blog
If you are granted a durable power of attorney over another person, it means that you have the right to make financial and legal decisions on their behalf. However, the power of attorney does have its limits, and a recent case that went to the Supreme Court in South Dakota illustrates the importance of clarifying what the capabilities of the power of attorney entail.
Facts of the Case
In the case of Studt v. Black Hills Fed. Credit Union, Dorothy McLean invested a certificate of deposit (CD) with the credit union in 2008. Then in 2012, she moved in with her son, Ronald Studt, and also named him as her attorney-in-fact with a durable power of attorney form. In his role, Mr. Studt would be allowed to transfer and gift property to persons or organizations as long as Ms. McLean’s financial needs could still be met and that the transfers were for estate planning purposes.
Mr. Studt then informed the credit union that they should close all of Ms. McLean’s accounts and transfer them to a bank in their hometown. In addition, the credit union should forward the funds of the CD when it matured. The credit union accepted the power of attorney and did as was asked, but left the CD until it matured.
Ms. McLean became terminally ill in May 2013, and at that time Mr. Studt asked about who was the beneficiary on the CD. The beneficiary was David Sholes, and Mr. Studt requested that the beneficiary be changed to him. He was told that only the CD’s owner could change the beneficiary, so when Ms. McLean passed away later that month the funds were to go to Mr. Sholes.
Mr. Studt submitted a declaratory motion to the court to determine the rightful beneficiary to the CD. The credit union and Mr. Sholes argued that Mr. Studt does not have the right to self-deal as well as the fact that he did not have the right to change the beneficiary on the CD. The circuit court agreed that the language in the power of attorney was too broad and did not specifically authorize self-dealing, and Mr. Studt appealed.
Ruling of the Court
The case was appealed up to the South Dakota Supreme Court, where it agreed with the ruling by the circuit court. Under the law, a power of attorney agreement must be strictly construed and pursued and only the powers that are explicitly stated in the agreement are allowed. In order to allow someone named as the power of attorney to self-deal, the document must provide “clear and unmistakable language” to that effect.
Mr. Studt argued that the agreement allowed him to make transfers to “any person,” which should include himself. The court disagreed and stated that the language was too broad and did not state with specificity that he was allowed to self-deal. Because a power of attorney document must be strictly construed and Mr. Studt’s lacked the specific language, his argument was struck down by the court and the justices ruled in favor of the opposing parties.