Being a Trustee of a trust is no easy task. Trust assets need to be managed, accountings and reportings need to be prepared and filed, and the trust scheme for distributions needs to be followed. Trustees also have fiduciary duties – duties of loyalty, care, and prudence. But to whom does a Trustee owe a duty? Could it be to a creditor? Also, what happens if an Agent lets bills go unpaid? Is the Agent liable?

These issues were recently litigated in Brownell v. Johnson. Kathleen Brownell filed suit against Scott Johnson, who was her former stepson, on the argument that he intentionally interfered with her contract for alimony payments. Kathleen and Phillip were married in 1994. During the marriage, Phillip’s health took a turn for the worse and so he engaged in proactive Medicaid planning. A trust was drafted and Phillip funded the trust with all of his assets. Phillip was the initial Trustee, and Scott was the successor Trustee. Scott and his brothers were remainder beneficiaries.

A few years later, Kathleen and Phillip got divorced. As part of the stipulated decree, Phillip agreed to pay Kathleen alimony of $1,600 per month until one of them died. Phillip made such payments to Kathleen until he transitioned into a nursing home. Scott, acting as Agent under Power of Attorney for Phillip, continued to make the alimony payments to Kathleen. Scott then petitioned to have the alimony contract terminated or modified, and stopped making the payments to Kathleen altogether. After phone calls and other attempts to get Scott to resume payments to her failed, Kathleen filed the instant suit against Scott, alleging intentional interference with a contract.

As a part of most elder law plans, an attorney will recommend that a client execute powers of attorney. These documents give another, the agent, powers to do certain acts on behalf of the person signing the document, the principal. In a Healthcare Power of Attorney, these powers would relate to being able to make healthcare decisions, access medical records, and talk to doctors. The powers held by the agent under a Financial Power of Attorney can be very broad, including property powers, financial powers, business powers, and legal action powers. This Financial Power of Attorney will be what we focus on here.

The agent, when acting under the power of attorney, is acting in a fiduciary capacity. What does this mean? The agent is basically stepping into the shoes of the principal and so must act in the best interest of the principal. Being an agent and having the powers outlined in the power of attorney is not authorization for the agent to do whatever he or she wants with the principal’s finances. But what happens when the agent is a spouse? Are the lines blurred? Can a spouse-agent transfer property to herself and not run afoul of her fiduciary obligations?

This topic was recently litigated in North Dakota. In Estate of Lindvig, the Supreme Court of North Dakota ruled that the spouse-agent could make such transfers. Let’s take a closer look at this case.