One of the responsibilities of an estate executor or administrator is dealing with beneficiaries of an estate. What appears to be a straightforward task can be complicated when the executor is contacted by someone who claims to hold a power of attorney (POA) for a beneficiary of the estate (also known as an “attorney-in-fact”). An attorney-in-fact is typically involved when a beneficiary is elderly or disabled and cannot act on his/her own behalf. There are special rules in place for New York executors when they deal with an attorney-in-fact. They cannot necessarily recognize the POA unless certain requirements are met.

Recording the Power of Attorney

Usually an attorney-in-fact merely has to show the POA for it to be recognized. In New York, it is illegal for a party to refuse to honor a POA without good cause. However, a different standard applies in estate matters. Under the New York Estates Powers and Trust Law, an attorney-in-fact is not authorized to act in an estate matter unless he/she first records the POA with the Surrogate’s Court where an estate is pending. In order to assist the court in determining the validity of the POA and deciding whether to accept it for recording, the attorney-in-fact must also submit a sworn affidavit with information on the following:

• How the POA was procured
• Mailing address of the grantor
• The attorney-in-fact’s relationship with the decedent
• Any financial arrangement with the principal (including a copy of any written agreement)
• Name of the attorney-in-fact’s attorney.

Executors should confirm that the POA has been properly recorded before relying upon it. This is particularly important with out-of-state attorneys-in-fact because recording creates jurisdiction on behalf of the Surrogate Court over the grantor and the attorney-in-fact. Therefore, if there was fraud or other reason for litigation, the attorney-in-fact is subject to the Court’s jurisdiction.

Out of State Attorney-in-Fact

Additional issues arise when it is time for an executor to make a distribution of estate assets to an out-of-state attorney-in-fact (or other fiduciary) who has indicated that he/she is empowered to act and receive funds on behalf of an estate beneficiary.

The executor’s decision to distribute assets out of state will typically be reviewed by the Surrogate Court. This is done either by the executor’s request for an Order authorizing the distribution or, after the distribution is made, when an accounting is presented to close and complete the administration of the estate and discharge of the representative. Best practice for the executor is to obtain approval from the Court prior to making the distribution. This is because if the executor makes the bequest and it is later challenged in response to an accounting, he/she could be subject to a surcharge.

A Court may direct payment to a foreign fiduciary where the foreign fiduciary is entitled to receive the funds and the fiduciary has either (a) offered adequate security in the domicile of the beneficiary to cover the amount to be distributed, or (b) shown that no security is required at the domicile of the beneficiary.

In asking the court for an Order authorizing distribution, the executor must establish that the proposed distribution is proper. Whether the foreign fiduciary is entitled to receive the funds is to be decided under the law of the jurisdiction where the disabled beneficiary is domiciled (even where decided by the Surrogate’s Court in New York). Accordingly, executors should contact experienced estate counsel who can assess the applicable law.

Executors must take care when dealing with individuals who claim to have a power of attorney for an estate beneficiary or risk legal liability.

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This post does not constitute legal advice or establish an attorney-client relationship.