In this week’s published civil opinion, the Court of Appeals decides whether a fiduciary can exercise a general power of appointment
Kosmann v. Brown, Record No. 0367-23-4 (Va. Ct. App. July 23, 2024)
Facts. In 2015, Edith Brown created a revocable living trust, appointing herself and her daughter Kimberly Monroe initial trustees, and appointing her niece Nadine Seamans successor trustee. The Trust provided that:
Any right or power, other than (i) an amendment by Will, or (ii) any right or power that would constitute a general power of appointment if held by [Brown’s] Attorney-in-Fact, may be exercised for and on [Brown’s] behalf by any Attorney-in-Fact who, at the time of the exercise, is duly appointed and acting for [Brown] under a valid and enforceable Power of Attorney executed by [Brown]….
Other than as provided in this Section, [Brown’s] powers under [this] Trust Agreement are personal to [Brown] and may not be exercised by any other person or entity.
Around the same time, Brown executed a Property Power of Attorney that appointed Monroe and Seamans as her agents. That POA gave Monroe and Seamans “the power to amend, revoke and/or exercise any and all other powers [Brown] could exercise under the terms of any trust of which [she is] Trustor.”
In 2019, Monroe, acting as attorney-in-fact for Brown, amended the Trust. Among other changes, she made the trust irrevocable, named herself and Connie Kosmann trustees, and distributed the trust residue to herself upon Brown’s death. Monroe also removed Brown as trustee of the trust, leaving herself as the sole initial trustee. Later that year, Monroe died.
In 2021, Seamans, acting as attorney-in-fact for Brown, petitioned for declaratory judgment, alleging that Monroe’s actions were “both legally invalid and ultra vires” because Monroe’s actions constituted a “general power of appointment,” which the Trust Agreement prohibited her from exercising. The circuit court agreed, and Kosmann appealed.
Issue. Whether the Monroe’s amendments to the Trust constituted a “general power of appointment.”
Holding. Yes. Monroe’s amendments to the Trust were undisputedly in her favor and she enacted them as Brown’s attorney-in-fact.
Notes. The Uniform Trust Code defines “general power of appointment” as a “power of appointment exercisable in favor of a powerholder….” It defines “power of appointment” as enabling “a powerholder in a nonfiduciary capacity to designate a recipient of an ownership interest in or another power of appointment over the appointive property.” It further states that a “power of appointment” “does not include a power of attorney.” The Uniform Power of Attorney Act states that the term “presently exercisable general power of appointment” “does not include a power exercisable in a fiduciary capacity or only by will.” Kosmann claimed that because the terms “power of appointment” and “presently exercisable general power of appointment” did not “include” fiduciaries and attorneys-in-fact, it was impossible by statutory definition for Monroe—as attorney-in-fact and fiduciary—to exercise a “general power of appointment” in violation of the Trust Agreement.
The Court of Appeals disagreed. First, it said that although these terms do not include fiduciaries and attorneys-in-fact, they also do not exclude them. An attorney-in-fact cannot automatically exercise a power of appointment, but the Code does not prohibit an attorney-in-fact from being authorized to also exercise a power of appointment. Second, even if Kosmann were correct in her statutory interpretation, the Trust Agreement specifically contemplates that Brown’s attorney-in-fact might exercise a general power of appointment and prohibits it. It allows a power to be exercised by an attorney-in-fact, unless that power “would constitute a general power of appointment.” It is therefore irrelevant how the Code defines those terms: Brown’s intent controls.
Here, there is no dispute that Monroe amended the Trust Agreement in her favor while acting in her capacity as Brown’s attorney-in-fact. Thus, her amendments were invalid and unenforceable.