Five months before he died, Albert R. Pool’s (Albert) capacity to handle his financial affairs diminished. His nephew Christopher, an attorney, had earlier stepped in to help manage the family’s financial affairs. After Albert’s death, his daughter Kathy began investigating Christopher’s actions. Kathy and her two sisters did not like what they found, and neither did the court.

A unanimous three-judge panel from California’s Fifth District Court of Appeal affirmed the opinion of the Probate Court that found Christopher had breached his fiduciary duty by improperly withdrawing and pocketing over $200,000 that belonged to the family trust. He had also improperly created a survivorship interest for himself.

Writing for the Court, Justice Mark W. Snauffer affirmed the order by Kern County Superior Court Commissioner Albert B. Kendall, with a minor correction relating to a computation error. Christopher was removed as a trustee and ordered to turn over all the money he had improperly directed to himself.

To quote the famous catchphrase from All the President’s Men, it is necessary to “follow the money” in order to understand the complexities of this case. Albert and his wife, who predeceased him by 20 years, had a joint checking account and a family trust that held personal and real property interests. Beginning in 2012, Albert’s nephew Christopher had power of attorney, was executor of Albert’s “pour-over” will, and had named himself successor-trustee of the family trust under amendments that he wrote. A pour-over will can be created to avoid probate by transferring them into the trustee’s care after the death of the trust holder.

Shortly after he began helping Albert, Christopher was added as an authorized signer on Albert’s bank account. He began making large deposits into the account, including proceeds from the sale of a family business. He also created a new trust account and in 2018, he began writing himself checks for funds in the joint account. He testified that Albert had told him that after he died, the money was “mine to do with as I wanted.”

In 2018, Albert’s daughter Kathy requested an inventory of the funds in all accounts. In response, Christopher’s attorney informed Kathy he was transferring some real property to himself, as trustee. In 2019, Kathy asked the court to remove Christopher as a trustee and to appoint a successor. The Probate Court granted her request and asked for a timeline for the distribution of all trust assets.

In 2020, Christopher agreed to resign as trustee and to provide an accounting of trust assets. The Probate Court ordered him to “reconvey title” of the property he had transferred to himself, said he could have a “right of first refusal” if he wished to repurchase it, pay damages owed under the Probate Code, repay $335, 779 to the trust, and a few other items. Christopher appealed.

Justice Snauffer explained that there was no dispute over the terms of the amended trust. Christopher’s actions regarding the property he wished to purchase, however, were at issue because of a Probate Code section that says, “…the trustee may not use a notice of proposed action (for) the sale of property to the attorney for the trustee.” The nephew argued that the Legislature “made a deliberate choice to permit trustees to use the notice of proposed action to “shield themselves from liability for making distributions of trust property to themselves.” The court did not find this persuasive.

The opinion next turned to the questionable deposits of over $200,000 into the checking account on which Christopher was an authorized signer. It noted that Christopher “treated money in the joint account as if it were money belonging to the Trust.” It pointed out that an attorney is a fiduciary, who has a legal obligation to “act in the best interests of someone else.” As a fiduciary, Christopher had to

“…observe the standard of care that would be observed by a prudent person dealing with property of another.”

He did not do so. Snauffer wrote, “Christopher did not adhere to his fiduciary duties in managing the subject funds.” He enumerated the nephew’s failings: he did not avoid conflicts of interest; he did not keep proper records and he failed to keep the deposits separate and distinct from other property and, instead, deposited the funds into an account that did not clearly identify the property as belonging to Albert.

Another problem area for Christopher was that his power of attorney did not authorize him to create a survivorship interest in the joint account funds. Sadly, he created this interest when Albert’s health was failing. This violates other Probate Code sections that prohibit changing beneficiaries and transferring the principal’s property to oneself.

The final section of the opinion related to the reimbursement of trust funds that were improperly withdrawn. Christopher was ordered to deliver approximately $205,643 plus interest to the new trustee Kathy and her sister trustees.

Courts rightly take the fiduciary duty of those with power of attorney seriously. And nephews, attorneys or not, should know better than to take advantage of their elderly and infirm relatives.