The Supreme Court of Kentucky recently issued a decision that underscores the importance of carefully evaluating the language and powers set forth in any power of attorney form. It also suggests that before granting a power of attorney, the principal needs to carefully consider the trustworthiness of his or her agent(s).

In Caudill v. Salyersville National Bank, (Supr. Court of Kentucky, No. 2008-CA-000017-MR) the estate of the late Arnett Gertrude sought to hold her bank responsible for having honored a power of attorney that Ms. Gertrude had executed, pursuant to which she had authorized one Jack Scriber to engage in banking transactions on her behalf. Apparently, Mr. Scriber had exploited that power to divest Ms. Gertrude of a substantial portion of her life savings.

The Court ruled in favor of the bank, concluding that the bank had neither the obligation nor the ability to investigate the circumstances underlying Ms. Gertrude's execution of the power of attorney form. Indeed, as the Court noted in its decision, the bank could have been held liable for wrongful dishonor had it refused to conduct the transactions that were the subject of the estate's lawsuit.