By Mark A. Schaum
The Florida legislature recently enacted legislation which beefed up the previously modest (7 page) statute concerning powers of attorney under Chapter 709 into a comprehensive set of provisions that is now known as “The Florida Power of Attorney Act” (hereinafter “The Act”) which became effective on October 1, 2011 (now 27 pages in length). Due to an array of issues that arose over the years in recognizing these documents, the Act is intended to insure that, when certain requirements are met, these documents will be recognized. As a consequence of the Act, additional duties and responsibilities are imposed upon both the Agents (the people named to act under the Powers of Attorney) and Third Parties (such as financial institutions). Certain people granting these powers (“the Principals”) may have to have their Power of Attorney (“POA”) documents reviewed and updated at their expense. This article summarizes what the author believes are the most pertinent provisions relating to Durable Power of Attorney documents.Durable Powers of Attorney – Durable Powers of Attorney are commonly used in estate planning to authorize persons to act on behalf of the person granting the power. They generally become effective immediately and remain effective in the event that the principal becomes incapacitated. In contrast, a General Power of Attorney becomes invalid upon’s the Principal’s incapacity.
Springing Powers of Attorney – Springing Powers of Attorney are designed to become effective only upon the incapacity of the principal granting the power. Such incapacity was generally required to be demonstrated by presenting the opinion of one or more physicians. For reasons that do not make sense to many practitioners, the legislature has seen fit to make invalid any Springing Power of Attorney document executed after the effective date of the Act.
Revocation – A previously executed Power of Attorney document may, but need not revoke a prior document. If revocation of a prior document is intended, the new Power of Attorney document must specifically state so. A general statement that previous documents are revoked would be sufficient.
Powers of Attorney Documents Created In Another State – A Florida Power of Attorney must be signed in the presence of two witnesses and a notary republic to be valid. However, a Power of Attorney created in another state must be recognized under the Act if such document meets the requirements of that state, even if such requirements are significantly less than that required of a Florida document, although it may take additional time and cost for an Agent to prove that a document is valid in such other state. Accordingly, we continue to recommend that Florida residents have Florida documents.
Financial Institutions As Agents – The act makes it clear that certain financial institutions (generally Trust Companies with trust powers, a place of business in this state, and authorized to conduct trust business in this state) may be named to act as Agents under Power of attorney documents.
Co-Agents – Unless the document provides otherwise, if multiple persons are named to act, each person may act independently. Thus, when naming multiple agents it is important to specify whether unilateral, majority or unanimous action is required by the Agents named.
Successor Agents – The act makes it clear that successor Agents can be named if the persons named to act die, resign, or become incapacitated. Many practitioners believed that this was permitted under prior law, but it’s nice to know that such has been codified into the statute. Some practitioners oppose naming successors because they believe it can lead to problems relating to proof of status in practice. We’ve never encountered such a problem doing this.
Authority of Agent (no more blanket powers) – Under prior law, many Power of Attorney documents would grant blanket powers authorizing the Agent to do any act which the Principal could do. Under the Act, if a principal wishes to convey any powers to the Agent, such powers must be specifically stated in the document. As a result, many practitioners (including our firm) have doubled and tripled the size of their documents just to list a multitude of possible specific actions out of a concern that a third party might deny certain requests by an Agent. We now also spell out the extent to which certain superpowers, if any, may be exercised by the named Agent(s). See superpowers and requirements below.
Superpowers – To help assure that certain powers are not casually granted in a document’s boilerplate, certain powers which have come to be referred to as “superpowers” require the signature or initials of the Principal next to the enumerated power. Superpowers include powers to make gifts to third parties (which may include gifts to the Agent), powers to create or modify trusts, powers to create or change beneficiary designations (retirement accounts, life insurance, annuities), powers to create or change rights of survivorship accounts, and powers to disclaim powers of appointment granted by others or property from others that may come from an estate or trust of another relative.
Duties of Agent – The Act imposes sets forth a list of duties upon the Agent which, among others, include (1) the duty to keep record of all receipts and disbursements, and transactions; (2) the duty to create and maintain an inventory of safe deposit box contents each time the box is entered; (3) the duty to act in good faith in a manner that is not contrary to the principal’s best interests; and (4) the duty to preserve the Principal’s estate plan to the extent it is known by the Agent.
Duties of Third Parties To Accept – Under the Act, Third Parties must accept or reject a POA within a reasonable period of time. For financial institutions such as banks or brokerage companies, four business days is presumed to be reasonable. If the Third Party rejects a POA, it must state the reasons for the rejection in writing. The Third Party may, in good faith, request and rely upon an opinion of counsel regarding any matter of law concerning the document, even with respect to a POA executed under prior law. Unfortunately, it seems that obtaining such an opinion would be responsibility of the Agent and at the additional cost to the Principal. The Act sets forth specific grounds for rejection by a Third Party. Furthermore, if the Third Party improperly rejects a POA, it may be liable for damages, including attorney fees and costs.
Compensation – Unless otherwise provided, “Qualified Agents” (a new term) are entitled to reimbursement of their expenses as well as “reasonable compensation under the circumstances”. Under the Act, a Qualified Agent is a Trust Company, a Florida attorney or CPA, a spouse, any heir of the Principal, and any other natural person that is a resident of Florida that has not been an agent for more than three Principals at a time.
Copies – The Act states that unless a Power of Attorney document specifies otherwise, a photocopy or electronically transmitted copy of an original document has the same effect as the original.
Conclusion – While Power of Attorney documents executed prior to the act may remain valid, Third Parties, in light of the more stringent requirements under the Act, may be reluctant to accept such documents under certain circumstances in a timely and cost efficient manner. Thus, it may make practical sense to update your Power of Attorney documents to avoid a potential cost or delay that could arise in the future. Furthermore, clients may want to review whether they gave away more power than they intended in the boilerplate of their existing documents. Finally, from the perspective of people named to act as Agents, certain people may want to reconsider whether they wish to serve with the additional duties that would be imposed upon them.
Mark A. Schaum has been practicing law in Boca Raton for over 25 years. He is Board Certified in Wills, Trusts & Estates Law and is also a CPA. His office is located at 1801 N Military Trail, Suite 203, Boca Raton, Fl. 33434. He can be reached at 561-750-7575 or firstname.lastname@example.org.