Durable Power of Attorney – New Legislation
On October 1, 2011, new legislation related to Durable Powers of Attorney became law. The revamped law has some significant changes to who can serve as an Attorney in Fact as well as protection to institutions who may be reliant upon its validity.
Generally speaking a Durable Power of Attorney gives another person (known as the Attorney in Fact or Agent) the ability to step into the shoes of the person who signed the instrument (known as the Principal) and do everything they can do. Although this general concept continues under the new law, the financial institutions who rely on these instruments can require additional assurances that the Durable Power of Attorney is still in full force and effect.
For example, a bank can require that an affidavit be executed by the Attorney in Fact that states that the Durable Power of Attorney is currently exercisable and the location of the principal’s domicile. The financial institution might also demand that the affidavit state that the principal is not deceased and there has been no revocation by adjudication or other event referenced in the instrument that would suspend the Attorney in Fact’s authority. Such suspension includes proceedings to determine the principal’s capacity or appointment of a guardian. The financial institution may also require that the person who will be signing the affidavit must also agree not to exercise any powers granted under the Durable Power of Attorney if he or she obtains knowledge that the instrument has been revoked, suspended or is no longer valid because of the death or adjudication of incapacity of the principal.
The new law also provides a section as to who may serve as the Attorney in Fact. They include persons who are at least 18 years old and are of sound mind as well as financial institutions with trust powers with a place of business in this State. The new law goes on to identify who may act as a qualified agent for the principal. Qualified agents include: 1) financial institutions with trust powers and a place of business in Florida; 2) an attorney or certified public accountant licensed in Florida; 3) the principal’s spouse or heir within the meaning of §732.103, Fla. Stat.; or, 4) any Florida resident provided that person is not serving as a an agent for more than three principals simultaneously. Although others can serve as Attorney-in-Facts, they will not be considered as qualified and are not able to collect for their services.
The new law also changes the manner in which multiple Attorney-in-Facts can handle the day-to-day business of a principal. If two or more Attorney-in-Facts are appointed, each co-agent may exercise authority independently of the other unless the Durable Power of Attorney provides that decisions must be made unanimously.
An important new feature of the new law is the specificity that it provides with regard to an Attorney-in-Fact’s duties as an agent. Some of the mandatory duties include: 1) to not act in a manner that is contrary to the principal’s known expectations; 2) not to act in a manner that is contrary to the principal’s best interest; 3) act in good faith; 4) preserve the principal’s estate plan; 5) perform personally (with some exceptions); 6) keep adequate records of all receipts, disbursements and transactions made on behalf of the principal; 7) maintain a safe deposit box inventory; 8) act with care, competence, and diligence; 9) act loyally for the sole benefit of the principal and to avoid conflicts of interest; and, 10) cooperate with health-care decision makers.
The new law also allows the Principal to grant his or her Attorney-in-Fact the ability to effect changes to their trust documents provided that both the Durable Power of Attorney and the Principal’s trust instrument grant such reciprocal power. Such authority must be specific as to the power granted. For example, the Durable Power of Attorney must at least state “my agent may create, amend and fund a revocable trust on my behalf.” When this type of authority is granted, the Principal must either sign or initial next to such authority. In addition, if the authority granted in the Durable Power of Attorney is to amend a trust instrument, the trust instrument must also grant the power to amend by an Attorney-in-Fact. The law goes on to further allow an Attorney-in-Fact the right to create or change rights of survivorship, change beneficiary designations, waive rights to be a beneficiary of a joint and survivor annuity or disclaim property and powers of appointment. Once again each of these grants must be initialed or signed off by the principal in the Durable Power of Attorney document.
Another major change to the law is the acceptance of copies of the Durable Power of Attorney in lieu of the original. Previously, financial institutions and other third parties had a policy that required the delivery of the original power of attorney prior to the agent being recognized as the Attorney-in-Fact. The new law provides that a photocopy or electronically transmitted copy of an original power of attorney has the same effect as the original. This creates a potentially dangerous situation and the only means of protecting your Durable Power of Attorney is to keep your instrument in a safe location, and if you do make a copy consider not including the page containing your signature unless you are granting your Attorney-in-Fact the powers to act in your stead immediately.
The new law has also eliminated the contingent powers that would spring a Durable Power of Attorney to life in the event the principal was determined to be incompetent by two licensed physicians. This change affects only those Durable Power of Attorney’s executed after October 1, 2011. In essence, if you executed a Durable Power of Attorney after October 1, 2011, it becomes effective the moment you lift your pen off the instruments paper. If you want to protect your instrument from misuse, you might want to consider having your attorney maintain your original with the understanding that copies may be released after confirmation from the Principal to do so; or, medical personnel declare the Principal incompetent and you authorize your attorney to release copies of your Durable Power of Attorney under those conditions. Any Durable Power of Attorney that was executed prior to October 1, 2011, and contains a springing or contingent clause is still effective and not voided by the new law.
The information contained in this article are the major changes to how your present and future Durable Power of Attorney will be reviewed by third parties. If you are not sure if your present Durable Power of Attorney meets the new requirements of the law, contact your attorney and spend an hour going through it. Although it is unlikely that there will be a need for an update, if one is needed, it is better to know it now as opposed to a time when it’s too late.