A power of attorney is a key component of a comprehensive estate plan. In general, a power of attorney allows a person (a “principal”) to appoint someone to act on his or her behalf (an “agent”) with respect to the management of the principal’s property and financial affairs. A power of attorney can be very broad or can be limited to certain specified acts. Most clients choose to sign a “Durable Power of Attorney,” which remains effective even if a principal becomes incapacitated.
Powers of attorney have been permissible under Florida law for a very long time. The state legislature, however, recently passed the Florida Power of Attorney Act (the “Act”) revising Florida’s power of attorney laws. With few exceptions, all powers of attorney executed on or after October 1, 2011 must conform to the Act. Provisions of the Act also apply to powers of attorney executed prior to this date.
The Act clarifies or expands many rules governing powers of attorney. First, the Act makes it clear that an instrument executed in another state will be valid in Florida if, at the time of its execution, it complied with the laws of the state in which it was executed. Although this provision clarifies prior law, it does not resolve certain issues connected with an out-of-state power of attorney. In deciding whether or not to honor an out-of-state power of attorney, a third party (such as a bank) may now request a legal opinion that the out-of-state instrument is valid. Not only must the principal pay for this legal opinion, the Act does not require the third party to obtain the opinion within a specific period of time. If such a legal opinion is sought, then it may increase the time necessary for the agent to carry out the action sought.
Second, the Act generally prohibits the execution of a power of attorney designed to become effective on a later date or upon the occurrence of a future event (sometimes referred to as a “springing power of attorney”). All powers of attorney now immediately vest an agent with the authority to act on behalf of a principal. A springing power of attorney executed prior to October 1, 2011, however, remains effective and may still be used.
Third, the Act requires a power of attorney to be specific as to the powers granted to the agent. General or “catch all” provisions are no longer effective. Still, the Act does permit certain banking and financial powers to be granted without being specifically identified in the power of attorney. These powers can be authorized by a reference in the power of attorney to the applicable statute.
Fourth, the Act now requires that, to authorize an agent to have certain powers, the principal must initial next to the provisions giving the agent these powers. Generally speaking, the powers requiring this separate enumeration include powers that may be considered estate planning powers (e.g., the power to change an IRA’s beneficiary designation).
Fifth, the Act sanctions a principal’s ability to give an agent certain powers over the principal’s estate plan (called herein “Estate Planning Powers”). Under prior law, it was not clear that a principal could give an agent some of these powers. Per the Act, a principal may authorize an agent to do any or all of the following on their behalf: (i) create a revocable trust, (ii) amend, modify, revoke, or terminate a trust created by or on behalf of another, (iii) create or change rights of survivorship, (iv) disclaim property or powers of appointment, and (v) make gifts. A principal must initial next to each of these Estate Planning Powers authorized under his or her power of attorney.
An agent having Estate Planning Powers, however, does not have carte blanche over a principal’s estate plan. The Act contains several interrelated limitations on the exercise of such Estate Planning Powers, and a principal will need to carefully consider such limitations in granting these powers. As part of this analysis, a principal will need to carefully consider which estate planning documents they provide (or authorize to be provided) to an agent. Further, to exercise certain Estate Planning Powers, an agent must be authorized to act under the principal’s power of attorney and under the estate planning document that is subject to the agent’s power (such as the principal’s revocable trust). These Estate Planning Powers are powerful, and a person authorizing an agent to have these powers should review each power (and its implications) carefully with his or her attorney.
Sixth, the Act provides that, unless the instrument specifies otherwise, a photocopy has the same effect as an original. A principal should carefully consider whether or not they intend that an agent may act via a photocopy.
Seventh, the Act provides that each co-agent may exercise his or her authority independently of other co-agents, regardless of how many agents are simultaneously serving. This rule modifies prior law. Under prior law, unless the power of attorney specified otherwise, two simultaneously serving agents were presumed to act jointly and three co-agents were presumed to act by majority consent. If a principal does not intend that each co-agent have independent authority, then his or her power of attorney should specify otherwise.
Finally, the Act clarifies an agent’s rights, obligations, and liabilities with respect to a principal. In terms of rights, the Act clarifies that an agent may be reimbursed for reasonable expenses and, in some instances, may receive compensation for their services. In terms of obligations, the Act diverges from prior law by articulating specific standards which govern an agent’s conduct. An analysis of whether this change in the law expanded an agent’s duties will depend upon the specific facts and circumstances, including the authority granted to the agent under the relevant power of attorney. In terms of liabilities, the Act confirms that an agent can be liable to either a principal or a principal’s successor in interest, and clearly defines an agent’s scope of liability connected with the actions of a co-agent.
In summary, the Act substantially modifies Florida’s laws governing powers of attorney. Although it reinforces the use of a power of attorney as a practical estate planning device, it may alter the operation and effect (but not validity) of a power of attorney executed prior to October 1, 2011. It may also affect the rights and obligations flowing between a principal and an agent. The summary above identifies changes in the law resulting from the Act, but is general in nature and is not intended to predict the application of the law to specific circumstances or to a specific power of attorney. Please let us know if you would like us to review your existing power of attorney in light of these changes in the law.
For more information on this article, please contact Doug Elmore at (941) 329-6637 or email him at email@example.com.