For years, Powers of Attorney got no respect. Banks, brokers and insurance companies could turn away the agent who was presenting the document for almost any reason and refuse to honor the agent’s authority under the document.
But for those who obtain a “new and improved” Power of Attorney document in Maryland, acceptance should come much easier. This, thanks to new legislation which completely re-writes Maryland’s Power of Attorney laws.
Until now using a Power of Attorney has been a “hit or miss” proposition. Many times the person presenting the document, now called the “agent”, is turned away when trying to conduct a financial transaction for his principal. This changes on October 1, when Maryland joins eight other states that have implemented their version of the Uniform Power of Attorney Act (the “Act”). This Act purportedly gives new teeth to the document.
Estate planning attorneys will tell you that a properly drafted Power of Attorney can be more important than a Will. If a person dies without a Will, the laws of the state prescribe how the decedent’s assets should be distributed according to the laws of intestacy; usually to the next closest family members.
But without a Power of Attorney, if a person becomes mentally incapacitated, there is no default mechanism for the family to take over the financial affairs of the disabled. Instead, a court would have to impose a guardianship over the disabled at great expense, formality and frustration to the family.
Even when armed with a properly drafted and executed Power of Attorney, one could anticipate some push back when attempting to use it. In recent decades, the compliance departments of banks, brokerage firms and insurance companies developed more stringent policies limiting the ability of an agent to make use of the document.
In an effort to remedy this well-documented problem, last April Maryland’s General Assembly adopted a modified form of the nationally renowned Uniform Power of Attorney Act. While the passage of the Act may be a cause for celebration for families, it will prove to be a source of heartburn for the drafting attorney.
The age-old struggle for attorneys when drafting Powers of Attorney has been to contemplate every conceivable use of the document and then incorporate empowering language for each such transaction. Requiring this “specificity” became essential as a result of a ruling by Maryland’s highest court in 1985. In King v. Bankerd, 303 Md. 98, 111, 492 A.2d 608 (1985), the Court of Appeals held that in order for a Power of Attorney to be effective for a specific transaction, it must be specific enough to authorize that particular transaction.
The Act does not alter the judicially imposed standard of specificity, it reinforces it. The Act includes two “sample” documents that may be relied upon as statutorily compliant. There is a general and a limited Power of Attorney format to choose from. Both have their shortcomings.
The model “limited” Power of Attorney is a misnomer because it actually contains more specific authorizations than the general Power of Attorney. The limited document was crafted as a “check-off” form which turns into a painful exercise for the principal. A person must decide which of the staggering 124 optional provisions he wishes to check off or he can select among various “all of the above” options.
Ironically, the Act’s more “general” document labeled “Personal Financial Power of Attorney” is about one-quarter the length of the “limited” document. Neither of the model forms was as thorough as the “attorney-drafted” Power of Attorney that we compared it with.
The law giving strong new teeth to the Power of Attorney document can be found in Title 13, Subtitle 6 of the Estates and Trusts Article of the Annotated Code of Maryland. Beginning October 1, any person (or entity) who fails to honor a statutorily compliant Power of Attorney can be liable to the principal for the costs incurred to obtain a court order to force recognition of the document. This includes paying the principal’s legal fees. This is a powerful a punch.
The law now prohibits a financial institution from insisting on their customers using that company’s own in-house Power of Attorney document.
The conundrum for attorneys now will be how to draft a document that is not only “substantially similar” to the model form (to be compliant with the statute) but which also incorporates the essential additional provisions needed to fill in gaps left by the model form.
Upon close scrutiny, the new model general form is missing many crucial provisions. For example it fails to authorize the agent to deal with any tangible personal property owned by the principal. This means the form fails to grant any authority to deal with the principal’s automobiles; such as selling, gifting or otherwise disposing of a vehicle. The limited version does contain such a provision, however.
A good number of the statute’s teeth can fall out when an agent is dealing with a financial institution outside of Maryland. The statute cannot force a financial institution based outside of Maryland, for example, to honor a Maryland Power of Attorney document.
Consumers could have won big under the Act if the end result was a statutorily acceptable form that every person could simply download for free from the State of Maryland. Instead, it seems the Act leaves them going back to their attorneys for a document that is more complex and lengthier than before.
Kevin F. Bress – heads the Estates, Trust and Elder Law Department of the law firm of Hodes, Pessin and Katz, P.A. – KBress@HPKlegal.com