We’ve previously noted that litigation involving powers of attorney is popular right now.  Powers of attorney take on particular importance in undue influence cases because they can turn the case on its head by creating a presumption of undue influence.  The reason why is that a power of attorney can create a fiduciary relationship between the principal and agent.

But not all powers of attorney are created equal.  In In re: Estate of Stahling, an Illinois appellate court recently answered the important question of whether a health care power of attorney creates a fiduciary relationship with respect to the execution of a deed transferring property to the agent which, as a matter of law, raises a presumption of undue influence.

The party advocating for the existence of a fiduciary relationship under a health care power of attorney claimed that any transaction between the principal and agent of a health care power of attorney results in a presumption of undue influence. Her reasoning was that the relationship between the principal and agent to a health care power of attorney is one involving trust and confidence which must give rise to a presumption of undue influence in transactions between the parties.

The appellate court disagreed. In doing so, it established two important points of Illinois law on powers of attorney:

First, the power of attorney at issue was a statutory short form power of attorney, which the agent did not have to sign. To create a fiduciary relationship, an agent must accept the powers delegated by the principal. The execution of the form by the principal, alone and without evidence of acceptance by the named agent, is insufficient to create a fiduciary relationship between principal and agent. Other than signing the POA, an agent could evidence acceptance by performing acts authorized under the power of attorney. So, Illinois practice pointer – if you want to clearly establish a fiduciary relationship between principal and agent, get the agent to sign the POA or otherwise evidence acceptance of the appointment.

Second, the court ruled that, under Illinois law, a health care power of attorney, alone, cannot create a presumption of undue influence in property and financial transactions between the power of attorney’s principal and agent. In other words, even where a health care power of attorney creates a fiduciary relationship between individuals, that relationship does not extend to matters outside the scope of the power of attorney. The court noted this position was consistent with recent authority regarding the same topic in North Carolina.