A Power of Attorney ("POA") can be an important tool for anyone who is planning his or her future. It enables an individual to decide in advance who will help him/her make life's important decisions in the event of future mental and/or physical disability. By granting a POA, the grantor/principal authorizes the grantee/agent (sometime referred to as an attorney-in-fact) the legal right to make decisions on his or her behalf.

In Kentucky, a POA is governed by Kentucky Revised Statute § 386.093. There are several different kinds of POAs. A general POA gives a grantee extensive power over finances; a special POA gives a grantee authority to act and make decisions only in limited circumstances; a health care POA gives a grantee the authority to make health care related decisions. A durable POA survives the incapacity of the grantor. It is also possible to make a POA "springing" so that it takes effect upon the incapacity of the grantor. Given the multiple types of POAs, advice from an attorney can be invaluable to ensure the POA is properly written to address the grantor's specific needs.

All POAs have two things in common: they require the grantor to place a great deal of trust in the grantee and terminate upon the grantor's death. Making someone your attorney-in-fact is the ultimate vote of confidence. Unfortunately, a grantee sometimes abuses his/her power and acts outside the authority established in the POA.

In 2012, the Kentucky Supreme Court shed light on this oft-encountered problem in the case of Ping v. Beverly Enterprises, 376 S.W.3d 581 (Ky. 2012). In Ping, Alma Duncan executed a general durable POA which granted her daughter, Donna Ping, the authority to perform all necessary acts for the management of her personal property, finances, and health care. The subject POA's language authorized Ping "to do and perform any, all and every act and thing whatsoever requisite and necessary to be done, to and for all intents and purposes, as I might or could do if personally present, including but not limited to..." The POA listed specific powers, but included a provision that, "[t]he enumeration of specific items, rights, or acts or powers herein is not intended to, nor does it limit or restrict the general and full power herein granted to my said attorney-in-fact."

In early 2006, Ms. Duncan broke her leg which led to surgery, hospitalization, and rehabilitation. While at a rehabilitation facility, Ms. Duncan suffered a stroke. After her stroke, Ping directed her mother be moved to the Beverly Enterprise nursing home facility ("facility"). On the day of her mother's entry into the facility, Ping believed her mother was incapacitated from the stroke and could not handle the facility's admission process. The facility's admissions application packet included an arbitration agreement that required all disputes between the facility and Ms. Duncan (or her beneficiaries, heirs, representatives, etc.) to be resolved through arbitration instead of court proceedings. Ms. Duncan signed the arbitration agreement although she could have elected not to sign because execution of the arbitration agreement was not a condition of admission.

Ms. Duncan passed away six months after her admission. Ping (as Administrator of her mother's estate) brought a wrongful death suit against the facility alleging, among other things, negligence and breach of statutory standards of care. The facility moved to dismiss the lawsuit and enforce the terms of the arbitration agreement. The trial court denied the nursing home's motion; however, the Court of Appeals reversed and upheld the terms of the arbitration agreement.

The Supreme Court unanimously reversed the Court of Appeals. The Court held that Ping was without "actual" or "apparent" authority to enter into an optional arbitration agreement pursuant to the POA. Because the POA only related to property, finances and health care decisions, there was nothing to suggest that the mother granted her daughter the power to waive the right to a law suit. The Court held that the grantor declares the scope of the authority of the grantee, but that authority must be expressly stated in the POA and cannot be inferred. The Court also discussed that a grantee's actions must be viewed as "reasonable" in light of a significant legal consequence on the grantor and must be performed in good faith.

The Court's holding in Ping is consistent with the leading trend of other states' treatment of this issue by way of statute and case law. As a consequence of Ping, it is now established in Kentucky that a general POA will not allow a grantee to bind the grantor to an arbitration agreement unless the POA specifically enumerates that authority. Beverly Enterprises appealed the decision to the U.S. Supreme Court, but the appeal was denied in April 2013.

While Ping's holding involved arbitration agreements, the precedent established byPing extends to other areas of elder law and estate planning. Our attorneys have successfully relied upon Ping in Circuit Court to obtain a ruling that a POA must expressly authorize the power to create, revoke, or modify a trust. Creating, revoking or modifying a trust pursuant to a POA has significant legal consequences.

As life expectancies increase and uncertain economic times continue, POAs will become more common. Choosing an attorney-in-fact is not a matter to be taken lightly and, as Ping demonstrates, a POA must be precise and thorough.