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.

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Page 27 of 71

| JULY/AUGUST 2018 26 As long as an agent acts with care, competence, and diligence for the best interest of the principal, the agent has is not liable solely because the agent also received a benefit from the act. 17 e agent accepts appointment by performing duties as an agent or by any other assertion or conduct indicating acceptance. 18 e agent's duties are fastened when the agent exercises authority, the agent's performs the agent's duties, or any other conduct indicating acceptance. e authority terminates when the principal revokes the authority; the agent dies, becomes incapacitated, or resigns; an action is filed for the dissolution of marriage to the principal unless the power of attorney otherwise provides; or the power of attorney terminates by its terms. 19 If an agent's authority has been revoked without the agent's actual knowledge of the termination and the agent preforms an act, the act is binding on the principal unless it was not executed in good faith or would be otherwise invalid or unenforceable. 20 e fact that agent authority dissolves when an action for disso- lution of marriage is filed and not when it is ordered by the court, is a recognition by the law that spouses should be prevented from handling the others assets under the power of attorney veil amid marital disorder. Agents are now required to report a breach or imminent breach of fiduciary duty by another agent of the same principal if they have actual knowledge. 21 e agent shall notify the principal and, if the principal is incapacitated, take any action reasonably appropriate in the circumstances to safeguard the principal's best interest. An agent that fails to notify the principal or take action is liable for reasonably foreseeable damages that could have been avoided if the agent had notified the principal or taken such action. 22 Under the old statute, if an agent abused the agent's authority under the power of attorney resorting to guardianship was often the only option to stop the abuse. ough improvements are being made, Kentucky guardianship proceedings can be timely, costly, and fragmented. 23 Upon its effective date, HB 11 allows for specific individuals to petition the district court to review the exercise of the agent's authority and grant specific relief. 24 If an agent violates the agent's duties and responsibilities, the agent is liable to the principal or the principal's successors for restitution and for attorney's fees when legal action is necessary. 25 THIRD PARTY ACCEPTANCE ird parties that had been asked to accept Kentucky powers of attorney often hesi- tated to honor the power of attorney due to the vagueness in the law of what is required and the lack of protection afforded third parties with respect to who is liable for an agent's fraudulent conduct. Frequently, well-drafted powers of attorney had been rejected if not on the third-party's internal form. HB 11 specifies who is required to accept a power of attorney, what legal options are available for the third party if unsure of its validity, and who is liable should an agent misbehave or misappropriate funds. e new law regards the third party similar to a bona fide purchaser in the UCC; if the third party acts in good faith, they are not liable for the agent's acts if the power of attorney is found invalid. In other words, the good faith rule also applies to the third party who accepts the power of attorney. A person who accepts the POA is not responsible to determine or ensure the proper applica- tions of funds or property by the agent. THE GOOD FAITH REQUIREMENT e new general rule is if someone accepts a notarized power of attorney without actual knowledge that the power of attorney is invalid or that the agent is violating the agent's duties, the individ- ual accepting the power of attorney may rely upon the instrument. Further, if a person accepts an acknowledged power of attorney without actual knowledge that the signature is a forgery, the third party may rely on the presumption that the signature is genuine. 26 Further, if a third party who in good faith accepts an acknowledged power of attorney without actual knowledge that the power of attorney or the agent's authority is void, invalid, or terminated, or that the agent has exceeded the agents authority, the third party may rely upon the power of attorney as if the power of attorney were genuine, valid, and still in effect. 27 ADDITIONAL ASSURANCES ARE AVAILABLE If a third party accepting a power of attorney is unsure of its validity or has a good faith reason for suspecting abuse of power, additional assurances are available through House Bill 11. Features: POTPOURRI

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