Effective October 1, 2016 Connecticut will have finally updated its 1965 law governing Powers of Attorney (POA’s). The new law, called the Connecticut Uniform Power of Attorney Act, or “CT UPOAA”, makes many changes that estate and elder law attorneys think are long overdue, and useful, and it imposes new obligations on banks to whom POA’s are presented. (The changes are found in CGS Chapter 15, Sections 1-350 to 1-35, as amended by Public Act 16-40 this year.)
POA’s are simply written designations of authority to someone (called an Agent in the new law). Very often, POA’s are presented to bank tellers by Agents seeking to cash a check or withdraw funds, purportedly for the person (Principal) who created the POA. It is those banks tellers who often identify Agents who are using a POA to steal from an elderly person. That means that banks are understandably cautious about accepting POA’s presented to them.
On the other hand, a POA is often most useful when the person signing it becomes incapable of handling her finances, so a bank’s delay, or outright rejection of, the Agent’s authority can be costly and devastating to families.
As a result, lawyers, Agents and banks sometimes argue over a bank’s refusal to honor a POA because it is “old” or the form does not satisfy the bank for any reason. That creates a Catch-22 for the agent, who is then unable to use the power at the time it is most needed, and when the principal is no longer able to sign a new POA form because she has lost the legal capacity to do so. To resolve that problem in a balanced manner, the CT UPOAA requires banks to either accept notarized POA’s or request additional documentation within 7 business days. If the bank requests additional documentation, once the agent provides it, the bank has 5 days to accept the POA, unless its refusal is based on a safe harbor, such as suspected abuse or the bank’s knowledge that the POA has been revoked. In those cases, the bank continues to be free to refuse to accept the POA, without sanction or liability.
If the bank’s refusal is not covered by a safe harbor, then the agent can obtain a court order mandating acceptance of the power of attorney, and can potentially recover reasonable attorney’s fees and costs from the bank. In this manner, the new law tries to protect both banks and the families relying on POA’s to handle an incapable person’s finances.
In addition, the new law provides that the filing of a divorce or separation action automatically revokes the designation of a now or almost former spouse in a POA, and it assumes the POA remains effective during incapacity (so it is “durable”) without any additional language. Current law requires the Principal to state that the power is durable to give it that utility. Since most people assume POA’s are all durable, their designated Agent can be left without authority just when that authority is needed under the current law. The new law fixes that problem.
The new CT UPOAA contains two optional, statutory forms. One is a short form, similar to our current statutory short form, that is suitable for most transactions. Both statutory forms, if used, contain an updated list of basic powers (such as “real property” and “stocks and bonds”) that are defined in the new act. Unless these basic powers are crossed out, they will be available to the Agent.
The new law creates a second, long statutory form that includes additional, new estate planning powers, allowing gift giving and other powers that will not be appropriate for all clients. These new estate planning powers require a principal to “opt in” by initialing each power that is desired. One of the goals of opting in to the more controversial powers was also to help prevent elder financial abuse by encouraging signers to take notice of each power they were proactively giving to their Agent.
Regardless of which statutory form is used, both forms require notarization. As is the case now, principals are free to use a statutory form, or use a different form, as any form is permitted.
The new CT UPOAA becomes effective on October 1, 2016. It expressly provides that existing POA’s remain valid. The new law’s useful presumptions, such as revocation of a former spouse’s designation as agent and durability, will apply to POA’s executed before or after October 1. Since the statutory list of powers is new, the new forms cannot be used before the law’s October 1, 2016 effective date.