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OVERVIEW OF THE UNIFORM POWER OF ATTORNEY ACT |
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Background The catalyst for the new Uniform Power of Attorney Act (“UPOAA”) was a national study in 2002, which revealed growing divergence in state power of attorney legislation. The original Uniform Durable Power of Attorney Act, last amended in 1987, was at one time followed by all but a few jurisdictions. Despite initial uniformity, the study found that a majority of states had enacted non-uniform provisions to deal with specific matters upon which the Uniform Durable Power of Attorney Act is silent. The topics about which there was increasing divergence included: 1) the authority of multiple agents; 2) the authority of a later-appointed fiduciary or guardian; 3) the impact of dissolution or annulment of the principal’s marriage to the agent; 4) activation of contingent powers; 5) the authority to make gifts; and 6) standards for agent conduct and liability. Other topics about which states had legislated, although not necessarily in a divergent manner, included: successor agents, execution requirements, portability, sanctions for dishonor of a power of attorney, and restrictions on powers that have the potential to dissipate a principal’s property or alter a principal’s estate plan. To ascertain whether there was actual divergence of opinion about default rules for powers of attorney or only the lack of a detailed uniform model, the Joint Editorial Board for Uniform Trust and Estate Acts conducted a national survey. The survey was distributed to probate and elder law sections of all state bar associations, to the fellows of the American College of Trust and Estate Counsel, the leadership of the ABA Section of Real Property, Probate and Trust Law and the National Academy of Elder Law Attorneys, as well as to special interest list serves of the ABA Commission on Law and Aging. The survey responses demonstrated a high degree of consensus about the need to improve portability and acceptance of powers of attorney as well as the need to better protect incapacitated principals (see Linda S. Whitton, National Durable Power of Attorney Survey Results and Analysis, National Conference of Commissioners on Uniform State Laws (2002), available at http://www.law.upenn.edu/bll/ulc/dpoaa/surveyoct2002.htm). Basic Structure The UPOAA, which supersedes the Uniform Durable Power of Attorney Act, the Uniform Statutory Form Power of Attorney Act, and Article 5, Part 5 of the Uniform Probate Code, consists of four articles. The first contains all of the general provisions that pertain to creation and use of a power of attorney. While most of these provisions are default rules that can be altered by the power of attorney, certain mandatory provisions in Article 1 serve as safeguards for the protection of the principal, the agent, and persons who are asked to rely on the agent’s authority. Article 2 provides default definitions for the various areas of authority that can be granted to an agent. The genesis for most of these definitions is the Uniform Statutory Form Power of Attorney Act (1988); however, the language is updated where necessary to reflect modern day transactions. Article 2 also identifies certain areas of authority that must be granted with express language because of the propensity of such authority to dissipate the principal’s property or alter the principal’s estate plan (Sec. 201(a)). Article 3 contains an optional statutory form that is designed for use by lawyers as well as lay persons. Step-by-step prompts are given for designation of the agent, successor agents, and the grant of authority. Article 3 also contains a sample agent certification form. Article 4 contains miscellaneous provisions concerning the relationship of the Act to other law and pre-existing powers of attorney. Safeguards and Innovations An unavoidable tension in power of attorney legislative reform results from two competing objectives: 1) preservation of the effectiveness of durable powers as a low-cost, flexible, and private form of surrogate decision making, and 2) prevention of financial abuse of incapacitated principals. Further complicating reform efforts is the problem of trustworthy agents who are reluctant to serve under powers of attorney because of contentious family dynamics and the fear of liability. The UPOAA addresses these tension points with provisions that encourage acceptance of powers of attorney by third persons, safeguard the incapacitated principal, and provide clearer guidelines for agents. The following is a brief summary of these provisions. Encouraging Acceptance of Durable PowersTaking the lead from states that have addressed the problem of arbitrary refusals of powers of attorney by entities such as banks, brokerage houses, and insurance companies, the UPOAA provides broad protection for good faith acceptance or refusal of an acknowledged power of attorney (Sec. 119 & 120), consequences for unreasonable refusal of an acknowledged power of attorney (Sec. 120), and recognition of the portability of powers of attorney validly created under other law (Sec. 106). With respect to sanctioned refusals of a power of attorney, the Act provides adopting states a choice between two alternatives: Section 120, Alternative A, which sets out liability parameters for refusal of any acknowledged power of attorney not excluded by the statutory safe harbors, and Section 120, Alternative B, which applies only to refusals of acknowledged statutory form powers of attorney. As an additional protective measure for the principal, both alternative Sections 120 allow refusal of an otherwise valid power of attorney if the person believes that “the principal may be subject to physical or financial abuse, neglect, exploitation, or abandonment by the agent or a person acting for or with the agent,” and makes or knows that another person has made a report to Adult Protective Services (or the equivalent governmental agency). Protecting the PrincipalProtection of the principal under the UPOAA is also multi-faceted. The UPOAA specifies mandatory as well as default fiduciary duties for the agent (Sec. 114), liability provisions for agent misconduct (Sec. 117), a broad standing provision for judicial review of the agent’s conduct (Sec. 116), and the requirement of express language to grant certain authority that could dissipate the principal’s property or alter the principal’s estate plan (Sec. 201(a)). These areas of authority include, among others: creating, amending, revoking, or terminating an inter vivos trust; making a gift; and creating or changing rights of survivorship or beneficiary designations (see Sec. 201(a) for the full list of powers that must be granted with express language). In addition to the mandatory duties to act in good faith, within the scope of authority granted, and according to the principal’s reasonable expectations (or, if unknown, in the principal’s best interest) (Sec. 114(a)), the UPOAA contains a number of default duties that can be varied by the power of attorney. These include the duty to preserve the principal’s estate plan (subject to certain qualifications) and the duty to cooperate with the person who has the principal’s health-care decision making authority (Sec. 114(b)). Providing Clearer Guidelines for the AgentAlthough it is well accepted that an agent under a power of attorney is a fiduciary, neither the Uniform Durable Power of Attorney Act, nor most current state power of attorney statutes specify what this means (see Karen E. Boxx, The Durable Power of Attorney’s Place in the Family of Fiduciary Relationships, 36 Ga. L. Rev. 1 (2001)). Arguably, under common law, an agent is bound to act solely for the benefit of the principal (see Restatement (Second) of Agency § 387 (1958)). The UPOAA recognizes, however, that many agents are family members who have inherent conflicts of interest, but that these conflicts do not, in and of themselves, prevent an agent from acting competently for the principal’s benefit. Given the rise in family disputes over incapacitated elders and the increasing number of statutes that recognize special liability for financial abuse of vulnerable individuals, a well-intentioned family member may be reluctant to serve under a power of attorney. The UPOAA
addresses this dilemma in a default provision which recognizes
that an agent who acts with care, competence, and diligence for
the best interest of the principal is not liable solely because
the agent also benefits from the act or has conflicting
interests (Sec. 114(d)). Furthermore, Section 115 permits a
principal to include in the power of attorney an exoneration
provision for the benefit of the agent. Another UPOAA provision
that operates to the benefit of both the principal and the agent
is Section 118 which requires notice of an agent’s resignation.
If the agent cannot effectively notify the principal because the
principal is incapacitated, the provision gives a hierarchy of
persons to whom the agent may give notice, including a
governmental agency having authority to protect the welfare of
the principal (Sec. 118).
The UPOAA language, as approved
at the NCCUSL Annual Conference in July, is available at
www.nccusl.org. The edited
Act with commentary and legislative notes will be available on
the NCCUSL web site in early November. |