Financial Fitness & Life Planning

Question:  My parents executed Power of Attorney Documents a few years ago and designated me as their agent. I have recently heard that there was a change in the law governing these documents.   My father no longer has capacity to execute a new power of attorney. What do these changes mean for me?  Are my Parents’ documents still valid? Should my mother, who still has capacity, update her Power of Attorney?
 
Answer:  A Power of Attorney is a document by which a person (the Principal) can designate an Agent (an Attorney-in-Fact) to act on his or her behalf with respect to financial or legal matters. In an effort to prevent abuse by agents, the State has enacted some sweeping changes to the law governing Powers of Attorney. On January 27, 2009 the Governor signed a new power of attorney bill amending many of the provisions of the Power of Attorney law. The change in law was due to take effect on March 1, 2009. 
 
However, more time was needed to educate the legal community about the change in law and it was again amended on February 25, 2009 extending the effective date to September 1, 2009. 
 
Currently, only the acknowledged signature of the Principal is required. The new legislation requires the signatures of both the principal and the agent; both signatures must be acknowledged or notarized. 
 
In order for an agent to make gifts the Power of Attorney will have to be accompanied by a separate form called a Statutory Major Gifts Rider (SMGR) which will require separate execution and two disinterested witnesses. The SMGR will also be required if the agent is to have the authority to act with regard to trusts, creating joint accounts, or changing beneficiaries on retirement plans. 
 
The new legislation also enables the principal to appoint a monitor to oversee the actions of the Agent. The principal can include a provision appointing a monitor to request and receive records of transactions conducted by the agent.
 
The statute now lays out the specific fiduciary duties held by the agent which will apply to all Powers of Attorney, not just documents executed after the effective date. The agent is held to a “prudent person standard of care.” As your parents’ Agent, you will now be required to keep record of all transactions (including receipts) and make the record available at their request. You must act in accordance with your parents’ instructions and must keep their property separate from your own. Upon written request, these records must be made available to the monitor, or certain other parties. You may be held liable for violating this fiduciary duty.
 
The new law will apply to all Powers of Attorney executed on or after September 1, 2009. It will not affect the validity of any Power of Attorney executed prior to the effective date. The Power of Attorney executed by your Father will still be valid once the new law takes effect. But, since your Mother still has legal capacity, it would be advisable for her to execute an updated Power of Attorney document. It is also advisable for you to speak with an Elder Law attorney about your role as your parents fiduciary and your obligations under this new legislation.
 
                                                                                    By Kim M. Smith
                                                                                    Burner, Smith & Associates, LLP