If you’re thinking of estate planning and the managing of your assets after death, legal instruments like wills and powers of attorney (POAs) are important. However, what happens when these instruments clash with one another?
We recently encountered this question with one of our clients. They had a situation where this exact issue came up – an irrevocable power of attorney concerning land management conflicted with a will. We’ll share about this issue with you in this article.
The Irrevocable Power of Attorney
An irrevocable power of attorney is a legal document where one person (principal) gives another person (the attorney) the authority to act on their behalf.
Because this document is “irrevocable“, it means that the principal cannot revoke the POA once it’s given. It is supposed to remain in force even after the principal’s death, provided it is associated with some form of valuable consideration.
Usually this type of irrevocable POA is given when there is a sale of property, without a title. (i.e. master title cases.) But it could be given in other types of situation.
The Role of Valuable Consideration
“Valuable consideration” refers to something of value that is given or promised in exchange for the power of attorney. This could be money, services, or other benefits. The presence of valuable consideration is what makes an irrevocable POA different from a standard POA, which is revoked by the principal’s death.
In the case presented by our client, the man obtained an irrevocable power of attorney from his parents to manage their land. It was supposed to continue to be effective even after they passed away. The power given to him was huge — even allowing him to transfer their land to himself.
Unfortunately, the man’s parents did pass away, leaving behind a will that said, his father’s land was to be divided among all the children equally. So the important question arose, is the irrevocable POA still valid if there is a will which says something else, and the principal has passed away?
The answer, after our research, goes like this: We need to examine the nature and adequacy of the consideration given in the irrevocable POA. If the consideration is insufficient or not valuable, the court might be able to revoke the POA, even though it was stated to be irrevocable.
When a Will Conflicts with an Irrevocable POA
After the parents passed away, their will was presented, stating that the property should be divided equally among all their children.
This seemed to conflict with the irrevocable POA, which was still in force after the parents death.
Is it perhaps similar to your situation?
The key question here is whether the irrevocable POA supersedes the will, with special regards to the land.
Generally, a will should provide for the treatment of assets after death. However, if an irrevocable POA was created with valuable consideration, it might cause a situation of a “competition of rights”. (The POA gives rights, and the will gives rights, so they become competing rights because they are in direct competition!)
Legal Precedents and Interpretations
We found a judicial precedent, where the High Court examined an irrevocable POA, including the facts of its creation.
The court found that the “valuable consideration” promised was not valuable enough to justify the irrevocable nature of the POA.
As a result, the irrevocable POA was revoked!
This suggests that the validity of an irrevocable POA can be contested if the consideration is questionable, or insufficient.
More so in case of illiterate parents, or parents who are prone to undue influence, or duress, they may have signed the irrevocable POA without ever receiving the “valuable consideration”!
So, now you know how important it is, to document and justify the consideration of irrevocable POA.
How about you?
If you are drafting an irrevocable POA, please ensure that the consideration is sufficiently valuable, and indisputably documented. This is how you ensure that the irrevocable POA can stand up to scrutiny in court.
For heirs or other interested parties, looking to challenge such an irrevocable power of attorney, the “valuable consideration” mentioned in the irrevocable is the be key in contesting and defeating the instrument!
More than anything else, remember that if the irrevocable power of attorney is valid, that doesn’t mean that the will is invalid. It could be that both are valid, and the first to exercise their rights, wins.
Conclusion
Somebody said, where there is a will, there is a way. Unfortunately, where a will conflicts with an irrevocable power of attorney, there will be a way to create havoc!
So, while irrevocable POAs can provide a robust mechanism for management of property, even with the death of the principal, they are not bullet proof. Especially when the irrevocable POA conflicts with a will.
Please seek legal advice from a legal counsel when dealing with, or creating, such irrevocable POA.
Disclaimer
This article is not free legal advice. If you want to take action on its contents, please check first with a lawyer.