I often get calls from family members of loved ones who "need to get power of attorney" of their respective mothers, fathers, children, etc. There appears to be a misunderstanding regarding powers of attorney: what they are and how they are procured. What is even more concerning is that many Mainers are turning to websites and online resources to obtain their powers of attorney: a flaw that may prove very costly. This article is intended to assist individuals in understanding the values of having an updated, validly executed durable financial power of attorney in Maine.
1.) First of all, what is a Durable Power of Attorney?
A power of attorney is a document in which one person, the “principal”, appoints another person, the “agent”, to act on his or her behalf. Often times, the principal will give the agent general powers to perform any acts that the principal would be able to perform for themselves. A power of attorney is “durable” if it continues in effect even if the person who created it becomes disabled or incapacitated.
A power of attorney is a document in which one person, the “principal”, appoints another person, the “agent”, to act on his or her behalf. Often times, the principal will give the agent general powers to perform any acts that the principal would be able to perform for themselves. A power of attorney is “durable” if it continues in effect even if the person who created it becomes disabled or incapacitated.
2.) Who needs a Durable Power of Attorney?
All should plan for the possibility that they may become disabled or injured, and their spouses, children, or other loved ones will need legal authority to manage their property, transact their business, and pay their bills. Anything can happen. If something should happen to you (e.g. a car accident), you would be surprised how little your loved ones could do to protect you and your assets without either written authority from you (i.e. a power of attorney) or a court order.
All should plan for the possibility that they may become disabled or injured, and their spouses, children, or other loved ones will need legal authority to manage their property, transact their business, and pay their bills. Anything can happen. If something should happen to you (e.g. a car accident), you would be surprised how little your loved ones could do to protect you and your assets without either written authority from you (i.e. a power of attorney) or a court order.
3.) What if I don't have a Durable Power of Attorney?
If you do not have a power of attorney and something happens to you, your family could be faced with an expensive proceeding to be appointed as your guardian and/or conservator in order to protect you and your assets. The legal requirements for setting up a conservatorship are complex and time consuming. The conservator must also obtain and post a surety bond (which requires payment of an annual premium from your assets) and file annual reports or accounts with the court, which can be costly and time consuming. A durable power of attorney can avoid the cost and complexity of guardianship and conservatorship proceedings, as the agent can act generally without the need for court appointment and supervision.
4.) What should I be concerned about when granting these powers on my agent(s)?
There are certainly risks to be considered when choosing and appointing an agent. Even though the agent is considered a "fiduciary" and has the heightened duty to act in the principal's best interests at all times, there are many more opportunities for the principal to be taken advantage of. If general powers are given to the agent, the agent may decide to utilize those funds for a purpose other than the best interests of the principal.
There are certainly risks to be considered when choosing and appointing an agent. Even though the agent is considered a "fiduciary" and has the heightened duty to act in the principal's best interests at all times, there are many more opportunities for the principal to be taken advantage of. If general powers are given to the agent, the agent may decide to utilize those funds for a purpose other than the best interests of the principal.
5.) What is the law in Maine for Durable Powers of Attorney?
The Maine Legislature passed a law that became effective on July 1, 2010, to better define the powers and duties of the agent acting under a durable power of attorney. That law is codified in Title 14 M.R.S. 5-901 to 5-964. As a result, Maine has very specific requirements for a Power of Attorney to be valid in Maine.
The Maine Legislature passed a law that became effective on July 1, 2010, to better define the powers and duties of the agent acting under a durable power of attorney. That law is codified in Title 14 M.R.S. 5-901 to 5-964. As a result, Maine has very specific requirements for a Power of Attorney to be valid in Maine.
6.) Why can't I just print one off the internet and execute it?
The short answer is that you can never be sure that the form you are using will comply with Maine's Uniform Durable Power of Attorney Act. Different states have different variations on what the power of attorney must include to be valid or how the power of attorney should be executed. The new law listed above requires that a Maine Power of Attorney include specific statutory notices to the Principal and to the Agent. It also requires that the document be executed by the principal, or signed in the principal's presence by someone directed by the principal to sign the principal's name. This is different from the prior law and laws in other states that allow someone other than the principal to physically sign the document. Furthermore, a Maine Power of Attorney must be notarized.
7.) When does my Power of Attorney become effective?
Under the new law, a power of attorney is presumed to be effective when it is signed and acknowledged unless it states that it will become effective on a future date or upon the occurrence of a contingency such as incapacity or disability. A principal may direct that his/her doctor or another individual make the determination regarding whether the incapacity or contingency has occurred.
8.) Who can I appoint as my agent?
Most individuals will appoint their family members or close friends to act as their agents (e.g. spouse, children, parents, siblings, etc.). Others will appoint trusted professional advisers (e.g. financial planners, bankers, accountants, lawyers, etc.). The new law also allows for two or more persons to be co-agents, acting either jointly or singly, and for successor agents, and it more clearly defines the rights and obligations of a successor agent. For example, you could appoint two of your children to act together and they would both be able to act independently of one another.
9.) What types of things can my agent do and what are the duties of the agent?
Under a durable general power of attorney, unless the powers of the agent are limited, your agent can do most anything that you would be able to do for yourself. For example, they have power over and can deal with your financial accounts, stocks and bonds, real estate, tangible property, life insurance, operating businesses owned by you, claims and litigation, personal and family matters, estates and trusts, government and other retirement benefits, taxes and gifts.
A very important feature of the new law is §5-914, which defines the duties of an agent acting under power of power attorney to include some standards of care. For example, your agent has the duty to act in good faith, be loyal to the interests of the principal, avoid conflicts of interest, act with care, competence and diligence, keep accurate records of all receipts and disbursements, cooperate with holders of health care authority, and endeavor to preserve the principal’s estate plan. The new law defines precisely the extent of the agent’s liability for a breach of the agent’s duty.
If explicitly stated, a power of attorney may authorize the agent to create, amend or revoke an inter vivos trust (i.e., a trust created during one’s lifetime), make a gift, create or change rights of survivorship, change beneficiary designations, waive the principal’s rights under an annuity plan, disclaim property or exercise fiduciary powers on behalf of the principal. The new law allows the drafter to pick and choose the powers granted and may include all powers or only limited powers.
10.) What are some of the reasons that I may need or want a Power of Attorney?
Any number of situations can come up where a Power of Attorney would be highly useful. Here are a few (but not all) examples of when the Power of Attorney is useful:
- You may become disabled or incapacitated at any moment with no warning. A power of attorney would enable your agents to preserve your assets and manage your financial affairs until you can get back on your feet.
- Your spouse may lose their capacity and enter a long-term care facility. Dementia and Alzheimer's disease can come on rapidly. If your spouse enters a long-term care facility, you may be facing significant expenses to pay for their care. There are ways to preserve assets and protect your own financial well-being. A durable general power of attorney authorizing gifts between you and your spouse makes these options much easier.
- You may be out of the state or out of the country and need business transacted. Your agent is empowered and authorized to act for your benefit at all times.
The most important thing to keep in mind is that it is very easy to wait. However, anything can happen and you should plan ahead to provide your loved ones a way of caring for you and your assets when the unimaginable does happen. Don't wait until it is too late.
If you need assistance preparing and executing your Power of Attorney, please do not hesitate to contact me. Our phone number is 207-743-6351 and my email address is miles@dowslawoffice.com
