It is difficult to find a good Tennessee financial power of attorney form. Part of the problem is that the 1979 Uniform Durable Power of Attorney Act, adopted by Tennessee, does not include a statutory form. In the absence of a statutory form, a good place to start may be the financial power of attorney form found in Volume 26 of the Tennessee Practice Series.

Good case on the mental capacity needed to execute a power of attorney in Tennessee. In Tennessee, a principal is presumed to have the ability to make a durable power of attorney. Thus, if a person wishes to challenge a power of attorney based on competence, then they must clearly and convincingly show that the principal did not know the consequences of their conduct when they executed the power of attorney. “Ultimately, contractual capacity is a question to be resolved on the facts of each case and the surrounding circumstances.”

In this case, the court reviewed the principal’s medical records. Also, the court heard testimony from approximately 11 witnesses, including the principal’s family, the principal’s friends, the attorney who drafted the power of attorney, and the witnesses who attested the power of attorney. In the end, the court found that the challenger had not met their burden of proof. In other words, the challenger had not proven by clear and convincing evidence that the principal did not reasonably know and understand the nature, extent, character, and effect of his actions.

Eye opening Tennessee case on incorporating statutorily defined authority into a power of attorney.

In Tennessee, in a financial power of attorney, a principal can invoke a statutory framework for an agent’s authority by “clearly expressing an intention to do so.” The statutory framework specifically includes 22 enumerated powers and specifically excludes 9 other enumerated powers. Once invoked, the principal may modify the statutory framework by express language in the durable power of attorney.

In this case, Percy Holmes executed a power of attorney that included the words, “Pursuant to Tennessee Code Annotated §34-6-101, et seq.” The court held that this phrase “clearly expressed” Holmes intention to invoke the statutory framework. Apparently, reference to the first section of Tennessee’s Uniform Durable Power of Attorney Act, followed by the words “et seq.” or “and the following,” was enough to “clearly express” Holmes’s intention to use the statutory framework to govern his attorney-in-fact’s powers.

What is eye opening about this case is that Holmes never specifically stated in his power of attorney that he wanted to incorporate the statutorily defined authority. Also, he never expressly cited the section of the code allowing incorporation or listing the powers. In my view, a principal should have to do more than state, “Pursuant to Tennessee Code Annotated §34-6-101, et seq.” to “clearly express” an intention to define his agent’s powers by the statutory framework. If anything, the words, “clearly expressing an intention to do so,” indicate that a court should error on the side of excluding a power of attorney from the statutory framework rather than including it in the statutory framework.

Thoughtful article by Dan Holbrook on powers of attorney and the duty to account. In Tennessee, an agent has a duty to account to a principal for all actions taken under a power of attorney. However, what happens if the principal becomes disabled or incapacitated, a not unlikely occurrence given that the purpose of a durable power of attorney is to appoint someone to take care of your finances if you cannot take care of them yourself. In that case, an attorney in fact also has a duty to account to a legal representative appointed by the principal (or by a court). If a person wishes to name a legal representative to hold the agent accountable, then this article provides issues to think about, and sample language to include in the power of attorney.

Tennessee case on an agent under a power of attorney changing a life insurance beneficiary designation. Mother bought life insurance and named her three children as beneficiaries. Apparently, mother became angry with her children.

Mother executed a durable power of attorney naming her sister, rather than her children, her attorney-in-fact. Mother also executed a will, where she left almost everything to her sister, rather than to her children. Mother instructed her sister to change the life insurance beneficiary designation so that it benefited the sister rather than the children, and sister, using the power of attorney, did so.

Upon mother’s death, the children challenged the sister’s change of the life insurance beneficiary designation. And, the court found for the children and awarded them the insurance proceeds. Although the power of attorney gave the sister the general power to do anything that the mother could do, and mentioned several powers regarding insurance, it did not specifically provide that the sister could change beneficiary designations.

According to the court, “The general grants of power cannot be construed as adding the specific power to change the beneficiary on the principal’s life insurance, especially where, as here, the principal referred to several specific powers dealing with insurance – ‘apply for or continue policies, collect profits, file claims, make demands, enter into compromise and settlement agreements, file suits or actions’ – without mentioning the power to change the beneficiary.”

An opinion from the Tennessee Attorney General stating that another person may sign a power of attorney on behalf of a principal so long as the principal is present, capable, and directs the signature.

Straight-forward Tennessee case on the minimum requirements for a financial power of attorney. Mother wrote, “I [] would like to make [Daughter] my power of attorney.” She then signed the document, had it notarized, and had it attested by two witnesses. The court held that the document was not a valid durable power of attorney. Among other things, the document did not specify the daughter’s powers or when it was effective.

Narrowly written Tennessee case on an agent’s ability to delegate authority granted under a power of attorney.

Marie Hurst had three daughters, Brenda Blackard, Rebecca Sawyer, and Vicky Jones. Hurst named Blackard her attorney-in-fact. Blackard later attempted to give this authority to Sawyer through a notarized letter. Sawyer then used the letter to admit Hurst to a long term care facility. Finally, after Hurst’s death, Jones challenged the delegation.

The court held that Blackard could not delegate to Sawyer the power to admit Hurst to a long term care facility. According to the court, “Wherever one draws the line between powers conferred on the attorney-in-fact that may not be delegated and powers of the attorney-in-fact that may be delegated . . . obtaining admission to a nursing home and signing an arbitration agreement . . . must fall on the side of the nondelegable powers.”

This was obviously the correct result. It would have been interesting, however, if Hurst had included a specific provision in her power of attorney granting Blackard the authority to delegate powers. Although the 1979 Uniform Durable Power of Attorney Act, adopted by Tennessee, is silent on the issue, the 2006 Uniform Power of Attorney Act, adopted by 11 states, but not yet in Tennessee, allows an agent to delegate authority so long as there is express language in the power of attorney granting the agent the power to delegate authority.

Typical case on an agent’s duty of loyalty to a principal under a power of attorney in Tennessee. William Isaac Eaton appointed his sister-in-law, Elnora Eaton, as his attorney in fact. Elnora sold Eaton’s farm. She then gave half of the money to Eaton’s estranged wife, Ester Lee.

The court found that Elnora violated her duty to Eaton under the power of attorney when she gave half of the money to Ester Lee. According to the court, “An agent, as a fiduciary, is under a duty of loyalty to the principal. Accordingly, in matters connected with the agency, the agent must serve only the principal; the agent cannot act for themselves or in the interests of others.”

Bizarre case on the mental capacity needed to execute a power of attorney and the dangers of relying on a power of attorney in Tennessee, even when it is notarized, and even when the reliance is in good faith. William Jerry Duke was involuntarily admitted to a psychiatric hospital. While in the hospital, he executed a general durable power of attorney in favor of his sister, Linda Wright.

The power of attorney was prepared by Wright, by copying a different power of attorney drafted by an attorney. It was notarized by a human resources employee of the hospital, who was apparently willing to swear that Duke was of sound mind. Wright used the power of attorney to admit Duke to a long-term care facility.

Sometime later, after Duke’s death, Duke’s widow wanted to invalidate the power of attorney. Apparently, it was in the best interest of Duke’s estate to void the contract with the facility. Interestingly, Wright now gave evidence against the document: “She testified that Mr. Duke did not appear to know what he was signing, and she said that she knew that he was incompetent, as he did not recognize her.” (Not sure whether the facility would have a claim against Wright or whether Wright could be charged with fraud?)

Not surprisingly, the trial court found that Duke lacked capacity to execute the power of attorney. And the appellate court affirmed. Intriguingly, however, the court also found that the facility could not rely in good faith on the acknowledged power of attorney. Using words that will surely discourage the acceptance of powers of attorney throughout Tennessee, the court stated, “[You are] not entitled . . . to simply rely upon someone who comes in and says, ‘I’m the POA. I have the authority. Here’s the Power of Attorney. Let me sign the documents.’”

Perhaps a better result would have been to allow the facility to rely on the power of attorney? The 2006 Uniform Power of Attorney Act, adopted by 11 states, but not yet in Tennessee, allows good faith reliance. And Tennessee’s own health care power of attorney statute allows an institution to rely in good faith on an agent’s decisions regarding medical treatment. Even the court, in its opinion, seemed to acknowledge, “[This] is a matter for the Legislature to determine, not this Court.” Until the legislature does address the issue, however, Tennesseans may want to consider using the much more expensive revocable trust or conservatorship rather than the much more affordable financial durable power of attorney.