3 Vital Steps to Take When Facing a Power of Attorney Lawsuit

Fiduciary duty means the agent must prioritize the principal's interests above their own and act with the care a prudent person would exercise with their own finances. New York law requires agents to keep the principal's money separate from their own, document all transactions, and disclose any conflicts of interest. Courts evaluate fiduciary breach by looking at whether the agent's conduct deviated from what a reasonable fiduciary would have done under the same circumstances, not whether the principal ultimately suffered a loss.

Courts in New York presume that a principal who executed a power of attorney had capacity unless evidence shows otherwise. Heirs challenging the document must prove by clear and convincing evidence that the principal lacked capacity (meaning they could not understand the nature and consequences of the power) or that someone exerted undue influence over their decision. Medical records, testimony from people who observed the principal regularly, and the circumstances surrounding execution all matter. If the principal was already in declining health or isolated when the power was signed, courts scrutinize the transaction more carefully.

Durability determines whether the power survives the principal's incapacity. If the principal becomes incapacitated and the agent continues acting under a durable power, heirs or guardians may challenge whether the agent's later transactions served the principal's interests or exploited the principal's vulnerability. Courts pay close attention to the timing of large transactions, gifts, or account changes that occur after capacity declines. In New York courts, late or incomplete documentation of the principal's wishes or the agent's reasoning for transactions can hinder the agent's defense, particularly when months or years pass between the principal's decline and when records are produced.

Limited powers create a clearer record of what the agent was allowed to do. If an agent acts outside those limits, heirs can point to the document itself as evidence of unauthorized conduct. However, disputes still arise when the scope of a limited power is ambiguous (for example, does pay bills include paying for a caregiver or only utility companies?), or when heirs argue the agent misinterpreted their authority. Courts examine the language of the document, any written instructions the principal left, and whether the agent sought guidance before acting in gray areas.

Preserve all original documents: the power of attorney itself, any amendments or revocations, bank statements, investment records, correspondence between the agent and financial institutions, emails or letters where the principal expressed preferences, and any medical records showing capacity or decline. If you are defending an agent, gather records showing the agent sought the principal's consent for major decisions, consulted with family members, or documented the principal's instructions. If you are challenging an agent's conduct, document your own communications expressing concern at the time, any instances where the agent refused to provide account information, and records showing discrepancies between the agent's stated purpose and actual transactions. These materials often prove dispositive in settlement negotiations or summary judgment motions before trial.

As soon as you suspect mismanagement or impropriety, send a written request to the agent asking for a full accounting and copies of all transactions. Keep a copy for your records. If the agent fails to respond promptly or provides incomplete information, that delay and refusal become evidence of potential bad faith. Courts view an agent's resistance to transparency as a red flag. If the principal is still living and competent, consider having the principal write a letter or memorandum explaining their wishes and the agent's role, signed and dated. If the principal has declined, document your concerns in a dated email or letter to other family members and the agent, creating a time-stamped record of when you first raised the issue.

Yes. If the principal is still living and someone believes the agent is misusing the power, a party can petition the Supreme Court (or Surrogate's Court in some circumstances) for guardianship or conservatorship, which would remove the agent's authority and appoint a court-supervised fiduciary. A guardianship proceeding requires clear and convincing evidence that the principal lacks capacity to manage their affairs. Unlike a fiduciary duty claim, guardianship focuses on the principal's incapacity, not the agent's misconduct, though evidence of the agent's mismanagement can support the argument that the principal now needs court protection. Guardianship litigation is often faster than a civil fiduciary duty suit but involves more invasive court oversight of the principal's personal and financial life.

After the principal's death, heirs can petition the Surrogate's Court to compel the agent to account for all transactions and, if appropriate, recover misappropriated funds. The agent must file a detailed accounting showing all receipts, disbursements, and the agent's compensation. Heirs can object to the accounting, challenge specific transactions, and seek restitution. Surrogate's Court proceedings are less adversarial than civil litigation but still require clear documentation of what the agent did and why it violated fiduciary duty. Courts in Surrogate's Court often have substantial experience with power of attorney disputes and may move more efficiently than general civil courts, though contested accountings can still take years to resolve.