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Sharp Thinking

No. 137 Perspectives on Developments in the Law from Sharp-Hundley Law Firm, P.C. November 2016

Successor Agents Do Not Owe Fiduciary

Duties To Principal Until They Take Office

By Michael Olson, Michael@sharp-hundley.com, 618-242-0200
The Appellate Court recently confronted a novel issue over whether a successor agent under a
power of attorney owes a fiduciary duty to the principal before he becomes the attorney-in-fact.

In In re Estate of Shelton, 2016 IL App (3d) 140163, a divided panel of
the Third District held that a fiduciary relationship is not created until the
agent has the power to act as the principal’s attorney-in-fact. “Until that
power is actually conferred, there can be no corresponding fiduciary duty
to use that power for the principal's benefit,” the majority said.

Background History: In Shelton, the father conveyed both his and
his wife’s interest in a farm to the son. Following the father’s death two
years later, the daughter, acting as executor of her father’s estate, alleged
that the transfer was fraudulent because the defendant-son was the
successor agent in powers of attorney for both of the parents. The sister
argued that the mother, who was the primary attorney-in-fact for the father,
was incompetent to manage her own affairs. Olson

At the time of the conveyance, the mother was suffering from dementia and had been
experiencing a progressive decline in cognitive function. However, her physician did not certify her as
incompetent until two years later. In his report, the physician remarked that the mother was
incompetent at the time of the execution of the deed as well. The daughter then tried to use this letter
to retroactively declare her mother incompetent. If the court had accepted the daughter’s argument,
the son would have owed a fiduciary duty to his father, which would have voided the subsequent
conveyance as a form of self-dealing.

Court’s Reasoning: The court held that a physician’s note
establishing a principal’s incompetence cannot apply retroactively to prior
conveyances. As a result, the defendant-son was still merely the successor
agent to the father at the time of the transaction. The court reasoned that a
physician’s certification of incompetence “is meant to serve as a triggering
event that nullifies the primary agent’s authority.” Until this trigger occurs,
the principal power-of-attorney retains full authority to act on behalf of the
principal.

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Sharp Thinking is an occasional newsletter of Sharp-Hundley, P.C. addressing developments in the law which may be of interest. Nothing contained in Sharp Thinking
shall be construed to create an attorney-client relation where none previously has existed, nor with respect to any particular matter. The perspectives herein constitute
educational material on general legal topics and are not legal advice applicable to any particular situation. To establish an attorney-client relation or to obtain legal advice on
your particular situation, contact a Sharp-Hundley lawyer at 618-242-0200 or one of the addresses provided on page 2 of this newsletter.