As many of our clients already know, a comprehensive general durable power of attorney is an effective estate planning tool to authorize another person to act on one’s behalf in the event of disability or incapacity. In an effort to improve the usefulness of a power of attorney (“POA”), the laws regarding powers of attorney under the Ohio Revised Code were revised in March of 2012, in order to offer additional safeguards against abuse by the agent appointed in the POA and encourage third party acceptance.
Although many of the laws remained the same, there were some significant changes to promote the intended purposes for the revisions. A POA that was executed prior to March of 2012, did not enjoy a presumption of durability, that is it remains in effect even upon the principal’s incapacity, if the POA is silent on its durability. After the new laws took effect, a POA is presumed to be durable unless the POA states otherwise. In addition, coagents appointed in a POA executed after the new laws took effect are not required to act together unless the POA specifically requires the coagents to act together. These changes, among others, create confidence in the POA that the agent has the authority to act on behalf of the principal by reducing the necessity of additional documentation to prove the agent’s authority to act.
The desire to encourage third party acceptance does not outweigh the need to protect against abuse by the agent. Many powers of attorney have a general grant of authority to the agent to act on the principal’s behalf as fully as the principal could act on their own behalf. This general grant of authority is usually necessary to imply powers that are not specifically identified in the POA. The new law carved out several powers that cannot be implied by a general grant of authority; thus requiring that the powers be specifically identified in the POA in order to give the agent the authority to act. These powers include the power to (a) create a trust, (b) amend, revoke, or terminate an intervivos trust, (a) delegate the authority granted to the agent, (b) create or change rights of survivorship arrangements, (c) make gifts, (d) create or change beneficiary designations, (e) waive the right to be a beneficiary of a joint and survivor annuity, and (g) exercise any fiduciary powers that the principal has the authority to delegate to the agent. In practice, deciding to include many of these powers requires a careful review on their necessity to effectively carry out one’s estate plan.
In the case of POAs, the best defense is a proactive approach to identifying and addressing potential issues with the document. We have encouraged our clients for several years to review and update their general durable powers of attorney every five years to ensure that the agents named continue to be best choices for our clients and to promote third party acceptance. If your POA was executed before March of 2012, this would be a good time for you to review and update your POA to take advantage of the changes in the law.