By Judith Ellenthal, Esq.
Drafting a strong Power of Attorney is an essential tool for trusts and estate planning.
The purpose of a Power of Attorney (POA) is for a person, known as the Principal, to designate in a formal legal document authority and power to another person, known as the Agent. POAs allow the Principal to designate someone to assist in the handling of the Principal’s financial affairs. They can be used for a single transaction, like buying or selling real estate, or in an ongoing situation where the Principal will benefit from having someone they trust help with banking and financial transactions. Selection of a trustworthy Agent is essential, because POAs can result in serious harm to the Principal if the Agent abuses his or her power.
Take advantage of new benefits in Connecticut’s amended Power of Attorney Act as part of your estate planning.
Effective October 1, 2016, Connecticut amended its Power of Attorney Act. There are two new statutory forms. The new short form is similar to the previous POA short form. The form lists a variety of powers designated to the Agent. When the Principal executes the form, the Principal must cross out and initial any powers that they do not wish to grant to the Agent.
The new long form includes additional powers that the Principal must initial in order for them to become effective. The additional powers allow the Agent to handle estate planning transactions for the Principal, including the power to gift, or to create or change a beneficiary designation.
The new Act codifies an Agent’s duties under a POA. The Agent must act in good faith in accordance with the Principal’s reasonable expectations, and act only within the scope of authority granted to him or her. The Act also provides remedies for a breach of fiduciary duty by the Agent.
One of the most beneficial aspects of the new Act is that all financial institutions are now required to accept the standard POA forms. Prior to the Act many institutions would require a Principal to use POA forms that were specific to the financial institution, and were only effective with the institution. With the new Act, if the POA is properly executed the document must be considered valid by third parties. Any third party now presented with a POA must either accept the document as genuine or request a certification, translation or opinion of counsel within seven (7) days. The Act also contains remedies for failure to honor a valid POA.
The new POA is durable, meaning it will survive the subsequent incapacity of the Principal, unless otherwise stated. Another new provision in the Act mandates that when the Principal and Agent are spouses, the power of the Agent automatically terminates upon the filing of an action for dissolution of the marriage or legal separation, unless the POA states otherwise.
Finally, the new POA form also gives the Principal the ability to include additional limitations and provisions to the form in a “special instructions” section. This affords the Principal greater flexibility to tailor the POA powers to his or her precise wishes.
POAs executed prior to the effective date of the new Act are still valid if they complied with the law at the time they were executed. However, given the benefits of the Act, you may wish to consider a new POA to take advantage of the standards and flexibility provided by recent changes to the law.
If you are interested in a review of your existing POA or are considering executing a new POA, the Estate Planning & Probate group at Cacace, Tusch & Santagata would be pleased to assist you.