Bench & Bar

JUL 2018

The Bench & Bar magazine is published to provide members of the KBA with information that will increase their knowledge of the law, improve the practice of law, and assist in improving the quality of legal services for the citizenry.

Issue link: https://kentuckybenchandbar.epubxp.com/i/1007648

Contents of this Issue

Navigation

Page 26 of 71

25 BENCH & BAR | DOES THIS STATUTE AFFECT ALL POWERS OF ATTORNEY? e new statute does not apply to all powers of attorney. Section 3 exempts the following powers unless the document otherwise provides: 1. a power to the extent it is coupled with an interest in the subject of the power, including a power giv- en to or for the benefit of a creditor in connection with a credit transaction; 2. a power to make health-care decisions; 3. exercise voting rights or management right with respect to a legal entity; 4. a power created on a form prescribed by a govern- ment or governmental subdivision, agency, or in- strumentality for a governmental purpose; 5. a power for reciprocal insurers; 6. a power given by a member of the United States armed forces, a person serving as a merchant sea- man, or a person living outside the United States in connection with war activities as detailed in KRS Chapter 384; and 7. a power for the temporary delegation of parental rights. e statute also does not affect powers of attorney that were exe- cuted prior to its effective date, July 15, 2018. Powers of attorney that were executed before the effective date of the new statute are valid so long as its execution complied with the law of the state as it existed at the time of execution. 2 DEFINITIONS AND PROCEDURES CLARIFIED Prior to HB 11's execution, Kentucky provided little guidance, specific definitions, or procedures necessary to ensure a power of attorney's validity. Section 2 of HB 11 defines such terms of art as: 'Agent', 'Incapacity', and 'Sign.' Section 8 provides for a principal to nominate a conservator or guardian of the principal's estate. is nomination shall be treated as an indication of the principal's preference for the person or entity to be appointed conservator or guardian and the court is instructed to give this preference due consideration. Further, Section 10 clarifies that when a court appoints a limited conservator, limited guardian, or guardian, the power of attorney terminates unless the court specifically order the power of attorney remain in effect. Simple clarifications, such as what constitutes a signature 3 , when an agent's authority terminates 4 , and whether a copy is to be given the same effect as an original 5 are now spelled out in statutory law. Section 9 explains how to interpret when a power of attorney is effective and, once that is determined, what steps may be required. is section also allows an authorized agent to access relevant health-care information to determine whether the principal is incapacitated, unless the power of attorney otherwise provides. If there is more than one agent, each co-agent may exercise that co-agent's authority independently unless the power of attorney otherwise provides. 6 CHANGES TO EXECUTION REQUIREMENTS Section 5 requires a power of attorney to be signed in the presence of two disinterested witnesses. is section also allows for individ- uals who are not physically able to sign, for example, a quadriplegic individual, to direct another individual to sign so long as the reason for this method being used is recited somewhere in the power of attorney. Because powers of attorney are most often necessary when the principal cannot act on their own behalf, concerns of fraud, abuse and neglect often surround this topic. It is not unusual for an agent (or someone claiming to be an agent) to drain accounts and make unauthorized purchases. For these reasons, two signatures of disin- terested witnesses are now required for powers of attorney, making the requirements more like the requirements in a valid will. AN AGENT APPOINTED IN A POWER OF ATTORNEY IS NOW A FIDUCIARY In a 2013 edition of the Bench & Bar the authors mentioned that Kentucky did not have a comprehensive power of attorney statute which addressed the issues of agent and attorney-in-fact account- ability and liability. 7 e authors wrote "that to curb financial abuse of the elderly, Kentucky agents should be statutorily classified as fiduciaries." 8 With the passage of HB 11, agents now owe a duty of good faith and loyalty for the principal's benefit and are required to act with care, competence and diligence. 9 Agents must keep a record of receipts, disbursements, and transactions made on behalf of the principal, 10 cooperate with the health-care agent(s), 11 and attempt to preserve the principal's estate plan according to relevant factors. 12 A defense to an agent's actions called into question is that they acted in good faith. Where an agent acts in good faith, there will be no liability to any beneficiary of the principal's estate plan for failure to preserve the plan. 13 However, if an agent is selected because of special skills or expertise, the special skills must be considered in determining whether the agent has acted with care, competence, and diligence. 14 If an agent does not possess a special skill that is necessary to carry out the agent's responsibilities, they may delegate these tasks to another entity. 15 For example, if the agent is respon- sible for maintaining a residence and the residence needs electrical work, the agent may hire an electrician. e agent is not responsible for the electrician's mistakes so long as the agent exercised diligence in selecting and monitoring the electrician. 16 1 2 3 4 5 6 7

Articles in this issue

Archives of this issue

view archives of Bench & Bar - JUL 2018