Opinion ID: 2078029
Heading Depth: 2
Heading Rank: 2

Heading: Ademption Cases in Other States Involving Sales of Specifically Devised Property by Attorneys-in-Fact.

Text: At common law, a power of attorney was revoked by the incapacity of the principal. The durable power of attorney was created to avoid the common law result and provide persons with limited means a cost-effective alternative to guardianship proceedings. All fifty states have now enacted statutes authorizing durable powers of attorney. Carolyn L. Dessin, Acting As Agent under a Financial Durable Power of Attorney: An Unscripted Role, 75 Neb. L.Rev. 574, 575-80 (1996). While there are many cases in other states involving acts of court-appointed guardians where the testators are incompetent, there are only a few cases dealing with the question of whether acts of an agent pursuant to a durable power of attorney cause ademption of specific bequests. The cases have not reached uniform results. The first case dealing with the question is In re Estate of Graham, 216 Kan. 770, 533 P.2d 1318 (1975). In this case, a specific devise of real estate was sold by an agent pursuant to a power of attorney to support the testator's stay in a rest home. After the death of the testator, the beneficiary of the specific bequest sought the balance of the proceeds remaining in the estate. The Kansas Supreme Court held that no ademption occurred. The court emphasized that the devise was not conveyed with the full knowledge and consent of the testator during his lifetime. Id. at 1321. The court noted that it seemed logical that the same legal principles should apply to a conveyance by an attorney-in-fact acting under a power of attorney as are applicable to the acts of a guardian. Id. The court noted that were the rule otherwise, an attorney-in-fact hostile to one of the beneficiaries may adeem a gift through the sale of specifically devised property. Id. at 1322. The court emphasized, however, that the beneficiary was entitled only to the unexpended balance of the proceeds of specifically devised property. Id. The Ohio Supreme Court considered this question in In re Estate of Hegel, 76 Ohio St.3d 476, 668 N.E.2d 474 (1996). In this case, Hegel sold the principal's house after she had become incompetent pursuant to a durable power of attorney. The principal's will devised the house to Hegel. Upon the principal's death, Hegel claimed entitlement to the cash proceeds of the sale that remained in the principal's estate. The probate court held that the devise had been adeemed by extinction. On appeal, the Court of Appeals of Ohio reversed in a 2-1 decision. The Ohio Supreme Court reversed the court of appeals in a 4-3 decision and held that the specific devise was adeemed. The majority emphasized that while the Ohio legislature had passed a nonademption statute in regard to the actions of court-appointed guardians, it did not extend the rule to agents acting under durable powers of attorney. Id. at 477-78. The majority further noted that it did not regard those acting under powers of attorney as the same as guardians. The majority indicated that attorneys-in-fact have more freedom and can act without court approval as the principal's alter ego. Id. at 478. The dissenters emphasized that the critical factor was the testator's incapacity at the time of sale, not whether the sale was made by a guardian or by agent pursuant to a power of attorney. Id. at 478-80. One dissent emphasized that attorneys-in-fact are a recent occurrence and are often encouraged by estate planners and counselors as a way of avoiding judicial supervision. Further, the dissent argued that under the approach of the majority, an agent could manipulate the sale of property for his or her own benefit. Relying on the Ohio precedent, the Supreme Court of Nebraska recently held that the sale of a specific devise by an attorney-in-fact resulted in ademption. In re Estate of Bauer, 270 Neb. 91, 700 N.W.2d 572, 578-79 (2005). As in Ohio, the Nebraska legislature adopted an exception to ademption for the sale of property by a conservator or guardian, but not by attorneys-in-fact. In light of the specific action of the legislature exempting actions of conservators and guardians from ademption, the Nebraska Supreme Court refused to extend the exemption by judicial fiat. Id. at 579. Further, the Nebraska Supreme Court cited a Nebraska statute that is virtually identical to Iowa Code section 633.705(1), which states that acts done by an attorney-in-fact pursuant to a durable power of attorney bound the principal and successors in interest as if the principal were competent and not disabled. Id. The court reasoned that under this statute, ademption necessarily results from the acts of an attorney-in-fact pursuant to a durable power of attorney.