New York Probate and Estate Administration Lawyer Blog
When someone acts under a power of attorney, that person is a fiduciary. That means the agent must act for the principal’s benefit, keep accurate records, avoid self-dealing, and explain financial transactions when later called upon to account. In Matter of Goldstein, the Westchester County Surrogate’s Court considered contested accountings filed by a fiduciary who had served both as attorney-in-fact during the decedent’s lifetime and later as executor of her estate. The case involved large transfers, alleged gifts, reimbursements, questions about joint and beneficiary accounts, and whether the fiduciary should be surcharged.
Background facts
Gertrude Goldstein was widowed and lived alone in her Mount Kisco home. Her only child had predeceased her. In 2006, she executed a statutory short form durable power of attorney naming David Salvati as her attorney-in-fact and naming Lisa Brytus as successor agent.
The power of attorney contained a springing provision. It became effective only upon medical proof that Goldstein was unable to care for her personal and financial affairs. The document also included gift-giving authority, but that authority was limited.
In 2007, Goldstein executed a will leaving her residuary estate in four equal shares to David, his wife Doreen, Lisa, and Michael Ciarlo. David was nominated as executor.
In 2014, Goldstein suffered a stroke and entered a hospital, then a nursing home. A physician later wrote that she was unable to manage her financial and personal affairs and was not competent to make financial decisions at that time. David then began acting under the power of attorney.
During that period, David made numerous transfers and payments from Goldstein’s accounts. Some transfers were described as gifts to himself, his wife, his children, and other family members. One major transfer involved a $298,000 check from Goldstein’s Wells Fargo account to David’s own account. David testified that he used the funds to pay off his mortgage.
Goldstein died in September 2015. David later became executor of her estate. Lisa and Michael objected to his accountings as attorney-in-fact and as executor, arguing that he had engaged in improper self-dealing, made unauthorized gifts, failed to account accurately, and should be surcharged.
Issue
Did the objectants establish, as a matter of law, that David should be surcharged for improper transfers and accounting failures, or did some disputed issues need to be resolved at trial?
Holding
The court granted the objectants’ motion in part and denied it in part. Most significantly, the court held that David improperly transferred $298,000 to himself while acting under the power of attorney and ordered him to return that amount to the estate account. Other issues, including the propriety of certain gifts, reimbursements, expenses, professional fees, commissions, and account ownership questions, required trial.
Discussion
The court began with the basic duties of a fiduciary. An attorney-in-fact must act with the utmost good faith and undivided loyalty. Under General Obligations Law § 5-1505, an agent must follow the principal’s instructions, act in the principal’s best interest, avoid conflicts of interest, keep the principal’s property separate, and maintain records of transactions.
The court also relied on Matter of Ferrara, 7 N.Y.3d 244 (2006), which explained that gift-giving authority under a power of attorney is not permission for unlimited generosity. Gifts must be consistent with the principal’s interests, such as financial, estate, or tax planning, and cannot simply be used to benefit the agent.
The clearest issue involved the $298,000 transfer. David wrote a check from Goldstein’s Wells Fargo account to his own account while acting as attorney-in-fact. He used the money to pay his mortgage. The amount far exceeded the gift authority in the power of attorney.
David argued that Goldstein had personally directed him to make the gift and that it was not really made under the power of attorney. The court rejected that argument. The check itself was written from an attorney-in-fact account and was signed in that capacity. The court found that the argument that the transfer was independent of the power of attorney did not make sense on the record presented.
The court also found that David failed to prove the elements of a valid inter vivos gift outside the power of attorney. A lifetime gift requires intent, delivery, and acceptance. Here, David could not show delivery except through his use of the power of attorney, and the power of attorney did not authorize a gift of that size.
The court therefore held, as a matter of law, that the $298,000 transfer was self-dealing. David was ordered to return the money to the estate account within 30 days. The court reserved the amount and type of surcharge, including interest, until after trial.
Conclusion
Matter of Goldstein is a strong reminder that an attorney-in-fact cannot use a power of attorney as a blank check. Even when a power of attorney contains gift-giving authority, the agent must act in the principal’s best interest and within the limits of the document. Large transfers to the agent, the agent’s spouse, or family members are closely scrutinized and may be treated as improper self-dealing. The case also shows how important accurate fiduciary records are in estate and power of attorney accountings. Beneficiaries who believe estate assets were misused, improperly transferred, or inadequately accounted for should consult an experienced New York estate litigation attorney or probate attorney to evaluate possible objections, surcharge claims, and accounting remedies.