North Carolina Estate Planning Blog
Springing Powers-of-Attorney in NC: New Court Case Makes Third Parties Responsible
Powers of attorney, which should be part of every estate plan, allow an individual to appoint someone of their choosing to manage their assets and affairs, make medical decisions and handle other matters the individual would have controlled when they were competent. Many powers of attorney (POAs) are effective at the time they are signed, so that no physician certification is required. However, some POAs are designed to be “springing,” meaning that they are effective only when the person who signed the POA is certified by a physician to lack capacity to make decisions.
C&D Custom Homes, a home building company based out of Knightdale, NC and operated by Carroll Ogle, was the defendant in a recent court case that shed new light on how POAs are recognized and reviewed in NC. The new court ruling reinforced that in NC, in order to validate “springing” powers of attorney, a physician is required to certify that the principal no longer has capacity to handle his or her affairs. The ruling also establishes a critical responsibility of third parties in transactions or decisions made by an attorney-in-fact.
The Plaintiff, Suntrust Bank, was granted a summary judgment in their favor in June 2011, which was appealed in November 2012 by Sheila Ogle, the wife of Carroll Ogle. Sheila Ogle executed a springing POA in 1999, appointing her husband as her attorney-in-fact. Over the course of three years, her husband and his building entities opened loans through Suntrust Bank in Sheila Ogle’s name for property development. The loans later defaulted.
The North Carolina Court of Appeals recognized in its November 2012 decision that “Mr. Ogle had no authority to act on [Mrs. Ogle’s] behalf.” After reviewing the POA’s terms: “[t]he rights, powers, duties and responsibilities herein conferred upon my Attorney-in-Fact shall not be exercised by my Attorney-in-Fact until a physician has certified my Attorney-in-Fact that in his or her opinion I am no longer able (physically or mentally) to handle my personal and business affairs,” the court ruled Mr. Ogle’s POA over his wife’s affairs invalid. The NC Court of Appeals ruled Suntrust Bank is not entitled to recover from Sheila Ogle.
What does this mean for springing POAs in North Carolina? Third parties must be sure to do their due diligence to request physician certification in order to verify the validity of a POA. It also means that attorneys-in-fact must obtain certification and present it to third parties for the agency to be effective. For these reasons, I normally discourage clients from utilizing springing POAs. After all, if your agent is going to cheat you, wouldn’t they be more likely to do so when you are incapacitated?
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