After a few years of study and deliberation Colorado finally enacted the Uniform Power of Attorney Act this year. Bizarre though it seems in this day and age, the Act is not very controversial and most, including your humble correspondent, believe it will be a genuine benefit to us. Without raising taxes or the deficit!
How is this possible? Well, it’s possible through the dedicated work of a lot of professionals, including the National Academy of Elder Law Attorneys and American College of Trust and Estate Counsel who together with select committees of the ABA put together the Uniform Power of Attorney Act. This Act was the culmination of years of effort to address what practitioners and clients alike viewed to be deficiencies and needs in financial/property powers of attorney.
You’ve read in this space how Colorado law respecting incapacity can be expensive and time-consuming. Good powers of attorney, both medical and financial, could save thousands in expense in avoiding going to court for a guardianship and/or conservatorship.
Provided, that is, those powers of attorney were honored. It’s always been a delicate balancing act between the need to reinforce and protect self-determination–that is, the principal’s choices–with the potential for abuse that inheres in any unsupervised fiduciary arrangement. The idea is that an individual ought to be able to choose who to trust as a surrogate should something happen where the individual, temporarily or otherwise, loses capacity. Any good estate planner understands that planning for incapacity is at least as important as planning for death, and that families need to have tools to assist them in coping with the incapacity of a loved one.
For years we used the Colorado Statutory Power of Attorney for Property, as confusing a tangle of legal gibberish as was ever wrought by the fevered minds of a committee of lawyers. Even so, it worked pretty well in Colorado; except that when it came to trying to transfer or manage brokerage accounts, insurance policies, savings accounts, IRA’s or the like, well . . . not so much. Too many times I found myself speaking to a suit two time zones distant who refused to honor the Colorado power of attorney and insisted either upon the institution’s proprietary power of attorney or, in some cases, that there be a court-ordered conservatorship. It didn’t help that the statutory form contained some legal double-negatives that left those unfamiliar with it scratching their heads and suspicious. The new statutory form corrects many of these problems and is considerably simpler and more direct than its predecessor.
Going into effect 1 January 2010, the new Act also takes on the problem of third-party acceptance in other ways. Unless the bank or other third-party entity has a sound reason to suspect the authority of the agent appointed in the power of attorney, it should honor it. To encourage acceptance the Act puts the risk of a rogue agent on the principal who appointed him or her in the first place, not on the one accepting the power of attorney. Unless the bank or institution falls within one or more of a number of statutory “safe havens,” (such as where there is actual knowledge the power of attorney has been rescinded) unreasonable failure to honor a power of attorney and forcing the agent to seek a court order can subject the recalcitrant to liability for the reasonable attorney fees and costs associated with having to go to court. Previously the statute provided that a third-party might be liable for the fees and costs associated with getting a court-ordered conservatorship–always an expensive and sometimes lengthy undertaking. The new Act doesn’t force you to get a conservatorship but permits a more abbreviated proceeding in probate court that simply puts a judicial imprimatur on the power of attorney itself. The Act prohibits the third-party from requiring an additional power of attorney of its own making.
The new Act also does something long overdue–it codifies certain minimum standards of care and duty on behalf of the agent. These include the duty to act in accordance with the principal’s wishes when known, act in good faith, and to abide by the limits of the authority in the power of attorney. Unless the principal directs otherwise, these duties also include the duty of loyalty, to avoid any conflict of interest, and to act with “care, competence, and diligence.”
What happens to powers of attorney that were drafted before–that is to say, the ones you have now? You’ll be relieved to know that they’ll still be good, but after this year they will be measured against new statutory presumptions and defaults that can only be overcome by specific language in the instrument. Still, if you’ve been hangin’ out waiting for a good excuse to update your powers of attorney, 2010 might be a good time to “git ‘er done.”