An individual (hereinafter “the principal”) who has a power of attorney (POA) retains significant autonomy despite the POA’s function of granting authority to the designated agent. Because of these preserved powers, the use of POAs to grant substitute decision-making authority has advantages and disadvantages.
The pros are the principal’s authority over the agent and the principal’s ability to revoke the agent’s power. The cons include the agent’s difficulty in overriding the principal’s autonomy, even for legitimate or protective purposes. From a legal standpoint, if not always in practice, a principal’s own authority is difficult to overcome.
For purposes of this article, the discussion of a principal’s relationship with the agent applies to either a financial POA under Wis. Stat. chapter 244 or a health-care POA under Wis. Stat. chapter 155. Although there are distinctions between a health-care POA and a financial POA, the laws of agency discussed in this article apply to both types of POA.
Background: On Capacity
To understand a principal’s autonomy and delegated authority under a POA, one must take into account the principal’s capacity – whether it is the capacity to act for oneself, to execute a POA, or to revoke a POA.
Mark T. Johnson, U.W. 2008, is a partner in Johnson Teigen LLC, Fitchburg. His practice focuses on estate planning, elder law, special needs planning, and probate and trust administration. Reprinted from the May 2019 Elder Law & Special Needs Journal of Wisconsin.
Although Wisconsin case law on capacity and POAs is all but nonexistent,1 common law and treatises discussing agency frequently are cited and adopted in analyzing disputes involving POAs.2 The general common law of agency, especially as it pertains to financial matters, is well developed, and this article refers to the Restatement (Second) of Agency3 as a source of common-law understanding of agency.
Regarding the capacity to execute a financial POA, a Wisconsin Court of Appeals decision held that a principal may enter into an agency relationship if the principal has the “capacity to give legally operative consent.”4 This analysis squares with the Restatement’s analysis that actual authority is created when the principal assents to the agent taking action on the principal’s behalf.5 Furthermore, as discussed below, a principal may withdraw consent by revoking the agent’s authority.
Another resource for evaluating a principal’s capacity is Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers (hereinafter, the Handbook), a joint publication of the American Bar Association and the American Psychological Association.6 The Handbook states that in considering a principal’s authority to execute a POA, whether health care or financial, many jurisdictions analogize such capacity to the capacity to contract.7
This article continues the series of articles that focus on how lawyers can help older clients avoid or end elder abuse. Other articles in the series include the following:
Although the legal elements of consent differ from the elements of contract, the analysis for capacity for both may be comparable. That is, an individual’s capacity to consent and that individual’s capacity to contract can similarly be difficult to determine, despite the efforts of lawyers, judges, and other legal theorists to draw clear distinctions. As the Handbook concedes, “because the capacity to contract is such a malleable test, depending upon the nature, complexity, and consequences of the act at issue, lawyers and judges have few road signs in seeking an answer to the question of capacity for many of these transactions.”8 This is often why, when asked whether an individual has sufficient capacity, the immediate response before answering should be “capacity to do what?”
Although determining capacity might be a malleable test, this author proposes the following imprecise scale for the topic at hand: Revoking a POA requires less capacity than executing a POA, which requires less capacity than making a complex decision for oneself. (It also is reasonable to attempt to further parse capacity as to health-care decisions versus financial decisions and the capacity to execute or revoke a health-care POA versus a financial POA.) Coming to a more definite conclusion requires additional effort, whether using the Handbook in advising a client or seeking adjudication of capacity and competence in a court proceeding.
Pros: A Principal’s Power to Control and Revoke
It is a pillar of agency law that an agent’s authority depends entirely on the principal’s consent.9 Therefore, the principal’s authority remains paramount and is never diminished by the sharing of authority with the agent. Although the principal’s authority to act may be lessened by the principal’s own diminished capacity to act on his or her own behalf, the agent’s authority is never greater than what the principal originally granted under the terms of the POA.
The companion article conceptualizes the principal’s authority as “retained” and refers to retained authority implied in the statutes. Indeed, the statutes codify the principal’s common-law control of the agent. Certain duties of the agent to the principal – such as the duty of good faith and to act within the scope of the authority granted – cannot be modified by a financial POA.10
Also, a health-care agent cannot contradict a principal who is not incapacitated.11 These statutory provisions reflect the bedrock for the principal’s authority that is deeply grounded in the common law of agency. In all ways, the agent answers to the principal, because the principal’s assent is the sole source of the agent’s authority.12
The principal’s control of the agent is most obvious in the principal’s power to revoke the POA, arguably at any time. The Restatement explains that the power to revoke is based in the consensual relationship of the agency: Consent is “a relevant question on an ongoing basis throughout the duration of the relationship,”13 and a “manifestation of nonconsent, or dissent, to the other party [for example, the agent] is determinative.”14
The principal’s control of the agent is most obvious in the principal’s power to revoke the POA, arguably at any time.
Because the principal’s authority and autonomy are paramount, the principal can nearly always correct a wayward agent. In addition, a complacent principal can forgive or ratify a wayward agent’s actions. Only in limited cases, and with court review, will a wayward agent’s actions be reviewed without the principal’s consent.15
Some agents and principals may wish to establish a relationship with more power shifted to the agent, such as an irrevocable POA or other limit on the principal’s ability to revoke a POA. For example, some lawyers may draft health-care POAs to include a “Ulysses clause” to prevent a principal from revoking the POA under certain circumstances. However, such provisions are not supported by statutory authority and have not been tested or discussed in any appellate case in Wisconsin.
In this author’s opinion, the only voluntary arrangements that the principal cannot revoke unilaterally are conservatorships (voluntary proceedings under Wis. Stat. section 54.76) and irrevocable trusts. Both arrangements are financial, without a personal or health-care counterpart. Without additional voluntary options, especially for health-care decisions, an agent who needs to intervene in a principal’s autonomy is often left with guardianship.
Cons: An Agent Has Few ‘Protective’ Options
Because a principal’s authority can control and even remove the agent, it can prevent an agent from protecting the principal if the principal acts against his or her best interests. For example, an agent may be largely helpless if the principal pays money to scammers, makes foolish purchases, or is financially exploited, despite the agent’s advice or actions to the contrary. Furthermore, a belligerent principal could remove an agent or revoke a POA when an agent attempts to act contrary to the principal’s wishes, even when such action by the agent is for the principal’s protection.
Similarly, even with an activated health-care POA, a physician can decline to follow an agent’s direction to treat a principal if the principal expressly refuses the treatment. Also, a nursing home or an assisted-living facility is unlikely to admit a principal over his or her objection, even if the health-care POA authorizes an agent to admit the principal to such a facility.
The only voluntary arrangements that the principal cannot revoke unilaterally are conservatorships (voluntary proceedings under Wis. Stat. section 54.76) and irrevocable trusts.
In these types of cases, what should a conscientious agent do? One option may be to run interference, such as taking away a spendthrift principal’s checkbook or credit card. Perhaps moving a bank account from one institution to another can serve as a stalling mechanism. These tactics may work with a principal with significant impairment, if it is believed the principal will not find another way to access his or her own money. However, a determined or stubborn principal (perhaps with the assistance of an exploiter) might be able to find the money or demand access from the agent. If the principal insists on the agent’s cooperation, then the agent has little remaining recourse short of court intervention.
Court intervention, in the form of a guardianship proceeding, is arguably the only way someone can override the principal’s own autonomy and protect the principal’s health or financial well-being. Even with a perfectly drafted health-care POA, an agent’s directions might not prevail over a principal’s objections. Treating or admitting an individual over his or her objection requires guardianship (and protective placement in the case of refusing admission), for which a court must declare the individual incompetent, remove certain rights of the individual to act on his or her own behalf, and appoint a guardian to act in the individual’s stead.
Conclusion: A Principal’s Control is Central
For better or worse, a principal’s autonomy is difficult to overcome by an agent under a POA. The principal’s control of the agent is central to the common law of agency and is reinforced by statutory provisions. Even when intervention is necessary to overcome the principal’s autonomy, the agent may have few options under a POA and must resort to court-ordered protection of the principal, such as guardianship. The principal’s capacity to act for himself or herself, to execute a POA, and to revoke a POA are variables that challenge an agent’s ability to act, even for the principal’s best interest or protection.
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Mark T. Johnson, Johnson Teigen LLC, Fitchburg.
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1 The primary Wisconsin case that addresses capacity to execute a power of attorney is Production Credit Ass’n of Madison v. Kehl, 148 Wis. 2d 225, 434 N.W.2d 816 (Ct. App. 1988).
2 See, e.g., Kehl, 148 Wis. 2d at 229 (adopting Restatement (Second) of Agency as it pertains to the nature of the agency relationship).
3 Restatement (Second) of Agency (1958).
4 Kehl, 148 Wis. 2d at 229.
5 Restatement (Second) of Agency § 3.01.
6 ABA Comm. on L. & Aging & Am. Psychological Assn., Assessment of Older Adults with Diminished Capacity: A Handbook for Lawyers (2005).
7 Id. at 6.
9 Restatement (Second) of Agency § 3.01.
10 Wis. Stat. § 244.15(1).
11 Wis. Stat. § 155.05(4).
12 Restatement (Second) of Agency § 3.01.
13 Restatement (Second) of Agency § 3.10, cmt. b.
15 See Wis. Stat. § 244.16(2) (“Upon motion by the principal, the court shall dismiss a petition filed under this section [to construe the power of attorney or review the agent’s conduct], unless the court finds that the principal lacks capacity to revoke the agent’s authority or the power of attorney.”)