CHILD’S TRANSFER OF FATHER’S HOME TO HIMSELF UNDER POWER OF ATTORNEY IS A BREACH OF FIDUCIARY DUTY TO PRESERVE DECEDENT’S ESTATE
When respondent created an irrevocable trust naming himself and two of his six siblings as beneficiaries and transferred decedent’s property into the trust under his power of attorney, effectively disinheriting his other siblings, respondent breached his fiduciary duty to attempt to preserve decedent’s estate plan. The court sustained objector’s objections.
Gloria Capobianco executed a power of attorney on Nov. 1, 2005, naming her son Otto Capobianco as her agent. Gloria suffered from Alzheimer’s disease, which became severe by late 2011. She was hospitalized in April 2016 and placed in a medically-induced coma. Gloria never regained consciousness and died on June 3, 2016. Meanwhile, under his power of attorney, Otto created an irrevocable trust on May 27, 2016, naming himself and two of his six siblings as beneficiaries. He then transferred Gloria’s home and tangible property into the trust. Otto claimed in certain filings that he transferred such property into the trust to protect it from being counted for purposes of Gloria’s Medicaid eligibility. However, he also stated that he chose only to include three of Gloria’s children as beneficiaries of the trust because they supported and/or helped her significantly after the 2003 death of their father. Here, objector Johann Wible, another of Gloria’s seven children, objected to Otto’s accounting of the estate, claiming he improperly disbursed and disposed of estate principal. Otto correctly noted that the power of attorney granted him authority to dispose of Gloria’s real and personal property, the court observed. However, because the challenged conveyances were conveyances to the trust, they were only effective if the trust itself was valid. In considering the validity of the trust, the court noted that agents under a power of attorney only have the power to make gifts and create trusts if it is expressly granted to them by the principal. However, the agents under a power of attorney are also bound by a fiduciary duty to attempt to preserve the principal’s estate plan if preserving the plan is consistent with the principal’s best interest. Gloria died intestate. The purpose of the intestacy statute is to approximate the probable intent of the decedent. Under the intestacy statute, each of decedent’s seven children would be entitled to equal shares of her estate, the court explained. In creating the trust and naming only himself and two of his siblings as beneficiaries, Otto deviated substantially from the intent that the statute presumes when a person dies intestate and from the estate plan he believed Gloria created that antedated her incapacity. Moreover, there was no discernible purpose in creating the trust other than disinheriting Otto’s siblings, as the trust would have been subject to Medicaid lookback rules. “Using his power as agent under power of attorney to disinherit his four siblings based only on his evident resentment toward them is an action that cannot be characterized as being taken in good faith,” the court said in its opinion finding that Otto breached his fiduciary duty to attempt to preserve Gloria’s estate plan, rendering the trust invalid.
Reference: Digest of Recent Opinions, Pennsylvania Law Weekly, 41 PLW 514 (Tuesday, May 29, 2018) In re: Estate of G. Capobianco, PICS Case No. 18-0585 (C.P. Philadelphia, April 18, 2018)
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