As of January 1, 2018, North Carolina’s new Uniform Power of Attorney Act will be effective. This Act, signed into law this summer, provides significant guidance, clarity, and protection to those who use a power of attorney or those who act under one or those who are asked to accept one.
A power of attorney (“POA”) is legal document in which a person, the Principal, appoints another person, the Agent, to make decisions and conduct transactions on behalf of the Principal. In Elder Law and Estate Planning, these documents are foundational building blocks. Without this important document, an incapacitated person’s only other option for managing finances and assets is through a court-appointed guardian. What follows below are some of the updates under the new Act:
- Defined terms: The Act has defined terms like “incapacity,” which now allows a person to be deemed incapacitated due to an inability to evaluate information and make decisions or due to unavailability. Under the new Act, the term “Agent” takes the place of the former designation “Attorney in Fact.”
- Presumptions: The Act has provided for a number of legal presumptions. For example, in contrast with the former POA law, a POA executed under the Act is now presumed to be durable; there is no requirement that the POA expressly state its durability. Additionally, a Principal’s signature is presumed to be genuine if it is acknowledged (i.e., notarized).
- Default Provisions: The Act provides many default rules for when a POA fails to provide for certain circumstances. For example, if one co-Agent can no longer act, then the remaining co-Agent can act independently.
- Clarity: There’s lots of clarity and guidance in the new Act. Under the Act for POA validity, a POA remains valid even if it is old; a POA will not expire or grow “stale” over time. A copy of a POA has the same effect as a validly executed original POA. The Act provides for when a POA terminates, when an Agent’s authority terminates, and how to revoke a POA. There are also three new statutory forms: a Short Form POA, an Agent’s Certification, and a Limited POA for Real Estate.
- Protection: The Act offers many protections to the Principal, Agent, Co-Agents, and third-parties who are presented with a POA. There are significant safe harbor provisions for third-parties and these provisions identify how to respond when presented with a POA and when a POA must be accepted. There are specific authorities granted to Agents that must be stated in the POA or else the Agents lack authority to act, such as for making certain gifts or changing rights of survivorship.
Within the legal community, the new Act ushers in clarity for using and drafting a POA. However, the new Act will also impact other industries like banking and real estate. With the start of a new year, there’s no better time than now to review an existing POA to ensure it continues to meet its intended objectives or to draft a new POA that allows for all the bells and whistles of the new Act.