Wisconsin Lawyer: Procedural Gray Areas: New POA for Finances:

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    Procedural Gray Areas: New POA for Finances

    Wisconsin’s new power of attorney for finances provides more guidance for agents and protection for principals. Still, attorneys must be aware of some uncertainties that remain as to the meaning and effect of the law that created the new power of attorney.

    Maren Beermann & Mark T. Johnson

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    Wisconsin LawyerWisconsin Lawyer
    Vol. 84, No. 10, October 2011

    dark holeA year of practice under the new Uniform Power of Attorney for Finances and Property Act (the Act) has brought to light new questions of interpretation and applicability. This article provides a brief overview of the Act and highlights some questions dealing with procedural aspects that may directly affect attorneys’ drafting of and practice involving power-of-attorney documents. The Act’s substantive provisions have been discussed already in the Wisconsin Lawyer (see sidebar), and so this article focuses entirely on procedural issues. The scenarios that follow with a hypothetical principal, Clara Client, and her agent, Donna Daughter, illustrate various procedural gray areas with the new law. First, however, a very brief overview of the Act is in order.

    Overview

    The Act, which took effect Sept. 1, 2010,1 provides clarity regarding powers of attorney for finances (POAF), offers guidance to agents, encourages acceptance of POAFs by protecting those who accept them, and protects the principal in several ways. In addition, the Act provides a new statutory form.2

    The Act created new chapter 244 in the Wisconsin Statutes and repealed Wis. Stat. sections 243.07 and 243.10, which provided durable power of attorney powers and a statutory form, respectively. POAFs drafted before the Act took effect remain in force if they were valid under state law when the POAFs were executed.3

    The Act includes various default provisions, many of which the principal may change by express provision, either by specific language in an attorney-drafted POAF or in the “special instructions” section of the statutory form. In the form, the individual powers are listed by title, and the principal must write his or her initials next to the powers he or she wishes to grant.4 The full definition of each authority is listed separately in the appendix to the statutory form.

    Under the Act’s default provisions, a POAF becomes effective immediately5 and is durable (that is, remains in effect even during a principal’s incapacity).6 Alternatively, a principal may expressly provide for another date, event, or contingency to establish effectiveness.7

    The Act provides default fiduciary duties that the agent owes the principal.8 The minimum, mandatory duties require the agent to 1) follow the principal’s reasonable expectations (or if unknown, to act in the principal’s best interest); 2) act in good faith; and 3) act only within the scope of the POAF. Additional default fiduciary duties – for example, the duty of loyalty and the duty of care – are expected, unless the principal expressly provides otherwise. The statutory form provides an addendum describing the agent’s fiduciary duties.

    In general, a person who accepts an acknowledged POAF in good faith is protected from recourse.9 As an added protection, anyone asked to accept an acknowledged POAF may request and rely on an agent’s certification of facts related to the POAF, a translation of the POAF, or an opinion of counsel.10

    Likely to be frequently used, the agent’s certification allows an agent to certify factual matters concerning the principal, the agent, or the POAF. The statutory form provides an optional agent’s certification as an appendix.11 A person or institution asked to honor the POAF may rely on such certification without liability.12

    The counterparts of encouraging acceptance of POAFs are the good-faith bases for refusing a POAF.13 A refusal may be made within 10 days of presentation of a POAF, and the statute provides nine different grounds for properly refusing a POAF, including financial abuse, belief that the POAF is invalid, or knowledge or belief that the agent lacks the necessary authority. If someone improperly refuses to accept a POAF, the person requesting acceptance may petition the court to order acceptance and payment of the person’s attorney fees and costs for enforcing acceptance.14

    Maren Beermann, Chicago-Kent 2008, is the project director of the Guardianship Support Center at the Coalition of Wisconsin Aging Groups. She focuses in guardianships, advance directives, consumer protection, and protective placement and services. She is a board member of the Wisconsin Chapter of the National Academy of Elder Law Attorneys and member of the State Bar Elder Law Section. She has coauthored and authored various elder law publications and lectures extensively on guardianships and advance directives. Contact her at mbeermann@cwag.org.

    Mark T. Johnson, U.W. 2008 cum laude, is an associate with Hill, Glowacki, Jaeger & Hughes LLP, Madison, and practices in estate planning, family, elder, and special needs law. He can be reached at com mjohnson hill-law-firm hill-law-firm mjohnson com.

    Execution of a POAF Without Witnesses

    The Scenario. Clara Client completes her new POAF with the statutory form, filling in the blanks with the pertinent information for herself and her agent, Donna Daughter. Clara initials the specific powers she wishes to grant and adds special instructions. For the statutory assurance of having the POAF accepted, Clara has her signature acknowledged before a notary. But what if Clara was experiencing symptoms of dementia? What if Donna was strong-arming Clara into signing the POAF? The mere notarization of Clara’s signature provides no safeguard concerning issues of lack of capacity or undue influence.

    POAFs executed under the old section 243.07 did not require witnesses’ signatures, but the statutory form under section 243.10 provided for witnesses’ signatures as a protection for persons who executed the document without an attorney, thus lacking an attorney’s confirmation of legal capacity. The witnesses could acknowledge the fact that the principal executed the document voluntarily and confirm that the witnesses believed the principal to be of sound mind at the time of execution.15

    In contrast, the new law completely removes the witness protection from the statutory form and does not explicitly refer to a “sound mind” or “voluntary” standard. Although legal capacity is still, of course, a requirement to validly execute a POAF, the lack of clear, strict language, combined with no need for witnesses (especially for those who complete the form pro se), may result in issues arising regarding lack of capacity or undue influence and subsequent contentious litigation. Every attorney must be comfortable assessing a client’s capacity and be aware that undue influence cases involving statutory-form POAFs may be significantly more difficult to resolve than in the past, because there no longer will be witnesses to call on to attest to the principal’s voluntary execution or capacity at the time. The new form’s optional acknowledgment is an insufficient substitute for witnesses because an acknowledgment may be relied on to establish the genuineness of the signature but makes no statement as to the voluntariness of or capacity for execution of the document.16

    Opinion of Counsel

    The Scenario. Donna Daughter presents to a Branch Bank teller Clara Client’s POAF, which contains a vague special provision allowing Donna to name herself as an “owner” on Clara’s accounts. The teller wonders whether the special provision is legally sufficient for Donna to make herself a joint account holder and designate herself as the payable on death (POD) beneficiary to Clara’s accounts, and therefore seeks an opinion of counsel.

    Under section 244.19(4)(c),
    a person asked to accept an acknowledged POAF may request and rely on “an opinion of counsel as to any matter of law concerning the power of attorney if the person making the request provides in a writing or other record the reason for the request.”

    This provision leaves open two questions:

    1. Should the teller make the request to Donna Daughter or to counsel directly?
    2. From which counsel should the opinion be sought: the attorney who drafted the document, the bank’s legal counsel, or an advocacy agency?

    This provision was appropriately drafted broadly to permit flexibility. A general rule of thumb is for the teller or other individual to make the request to the agent so that the agent is informed and knows the appropriate statutory timelines involved in accepting the POAF, even if the individual chooses to consult in-house counsel for the opinion of counsel. The principal is responsible for the cost of this request.17 If the request for an opinion of counsel is refused, the individual may, in good faith, refuse to accept the power of attorney within 10 business days after the request is made.18

    If an attorney drafted the POAF, the most commonsense solution is for the individual to provide the agent with a copy of the request and to query the POAF’s drafter, who will be most familiar with the document, the principal’s wishes, and the law of the jurisdiction in which it was executed, especially if outside Wisconsin (the next section discusses significant issues surrounding out-of-state POAFs). Note, however, that providing the request or a copy thereof to the agent may not be advisable if the proposed transaction is unusual and suggestive of the agent overstepping his or her authority. The transaction might not appear to be blatant financial abuse, but if concerns rise, the agent should not be given the request.

    POAFs Across State Lines: Meaning and Effect

    The Scenario. Clara Client winters in Florida and summers in Wisconsin. She currently has only a Florida POAF. Does that Florida POAF give Donna Daughter all the authority she needs to act on Clara Client’s behalf in Wisconsin?

    Interpreting the meaning and effect of POAFs under chapter 244 is complex. There was no guidance to interpret the meaning and effect of an out-of-state POAF under chapter 243 and the chapter 244 meaning and effect standards differ significantly from the standards for determining the meaning and effect of an advance directive under Wisconsin’s power of attorney for health care (POAHC) law.19 Chapter 244 echoes the language of the Uniform Power of Attorney Act (the Uniform Act), which was drafted by the National Conference of Commissioners on Uniform State Laws in 2006. Uniformity of POAFs among states is the purpose of the Uniform Act, and so another state’s POAF should not drastically differ in meaning or effect from Wisconsin’s law if both states have enacted the Uniform Act. However, this is not always the case, because many states have not yet adopted the Uniform Act, and even if they have, they might have departed from the Uniform Act in certain particulars.

    Recommended Reading and Resources

    Under Wisconsin’s new law, the meaning and effect of the POAF is determined by the jurisdiction indicated in the POAF, or, absent such an indication, the jurisdiction in which the POAF was executed.20 The Uniform Act explains that the authority granted to the agent is to be neither narrowed nor enlarged by virtue of the POAF being used in a different jurisdiction,21 unlike Wis. Stat. chapter 155 (regulating POAHCs), which states that an out-of-state POA is valid and enforceable in Wisconsin only to the extent that the agent is authorized to make decisions for the principal under chapter 155.22 Notably, the former POAF law, Wis. Stat. chapter 243, was silent on the meaning and effect of out-of-state POAFs. As a result, the default process for many persons who were asked to accept an out-of-state POAF was to apply the same standard as outlined in chapter 155, with procedural issues governed by the jurisdiction in which the POAF was executed and the substantive issues governed by Wisconsin law. Chapter 244 completely changes that practice and will require individuals and entities asked to accept an out-of-state POAF to accept the POAF in accordance with the law of the jurisdiction indicated. Practically, this might result in a dramatic increase in out-of-state opinions of counsel when someone is asked to recognize an out-of-state POAF.

    So, if Clara Client spends her winters in Florida, she may wish to have two POAFs, one in Wisconsin and one in Florida (assuming she executes her Florida POAF after that state’s version of the Uniform Act goes into effect Oct. 1, 2011), because it is possible to have more than one POAF at once. Also, because the principal is ultimately responsible for the cost of an opinion of counsel, it is a reasonable suggestion for anyone living permanently or for the foreseeable future in Wisconsin to change his or her POAF to one controlled by Wisconsin law to avoid future potential attorney fees for opinions of counsel concerning an out-of-state POAF.

    Finally, there is also a potential for “legal” financial exploitation due to the new chapter 244 meaning and effect standards. Individuals who seek to exploit persons by using a POAF may convince an individual to appoint the abuser as agent under a POAF from a state with the least protective, broadest POAF statutory scheme. For example, the abuser might forum shop for the state with a POAF law that, unlike Wisconsin’s POAF law, does not restrict the agent’s authority to self-deal, thus allowing the agent to “lawfully” take all the principal’s assets for the agent’s personal benefit. Anyone in Wisconsin asked to accept that document would be obligated to honor it (assuming no other issues) according to the other jurisdiction’s more lenient law. If the POAF is legal in that other jurisdiction, such exploitation will be difficult to prosecute or litigate civilly in Wisconsin.

    Revocation

    An individual can revoke a POAF agent’s authority or the entire POAF under Wis. Stat. chapter 244,23 but the law provides no guidance as to methods of revocation. Rather, the statute makes clear that merely executing a subsequent POAF will not revoke a prior POAF,24 even if they are inconsistent; instead, revocation must be expressly stated. One reason for this is to prevent a principal from inadvertently revoking a comprehensive POAF when executing an additional POAF to grant a limited authority to an agent for a different purpose, such as closing a real estate transaction. However, the Act lacks specific directions as to how to expressly revoke a POAF. A good practice is to include a statement of revocation of all other POAFs in the new document, provided that doing so is appropriate to the client’s situation. Revocation without subsequent execution of a new POAF should be in writing, signed and dated by the principal (witnesses and notarization provide extra protection in this situation).

    Beware of litigation issues arising from POAFs that are allegedly revoked via defacing, tearing, or oral revocation (among other controversial methods), because if the principal lacks capacity to confirm the revocation, it may be difficult to prove if the principal actually revoked the document or if the action was taken by someone other than the principal without the principal’s knowledge or consent.

    However, the lack of guidance on how to revoke a POAF may actually benefit the principal in some situations. For example, if a subsequent statutory form is executed under circumstances involving undue influence, fraud, or lack of capacity, abusers using the statutory form to obtain control may not realize the necessity of adding a special provision revoking all prior POAFs, meaning the older POAF may still be in effect and the “old” agent may be able to continue to act and prevent financial exploitation.

    Regardless of how a POAF is revoked, the revocation should be clear and express, with notice of the revocation first given to any individual or entity holding a copy and then to the former agent.

    Dual POAHC and POAF Documents

    The Scenario. Clara Client wants to combine a POAHC and a POAF in one document, thinking it will make things easier for Donna Daughter to fulfill her duties as POAHC and POAF agent. Is this a good idea?

    The trend for the last several years has largely been away from using one document to execute both a POAHC and a POAF, and Wis. Stat. chapter 244’s new provisions further highlight the difficulty of creating one document to successfully accomplish the purposes of the two types of power of attorney. Although Wis. Stat. section 244.03 does not expressly prohibit dual documents, it does state that it does not apply to a power to make health-care decisions. A dual document can cause significant confusion to a layperson who, when asked to accept such a document, does not know which provisions of the document are controlled by Wis. Stat. chapter 244 and which provisions fall under Wis. Stat. chapter 155’s purview. Below are examples of confusing situations that might arise.

    Chapter 244 POAFs take effect immediately unless otherwise specified. Although an activation standard could be included, a POAF document that takes effect immediately is sometimes desirable for the client’s circumstances. A dual document in which the POAF authority is immediate and the POAHC authority is contingent on incapacity could cause confusion among people asked to accept the document, resulting in delays and stress.

    Chapter 244 also allows a principal to appoint co-agents,25 an authority that chapter 155 appears to preclude when defining a health care agent as “an individual” – singularly.26 Although some debate this interpretation of chapter 155, the designation of co-agents for health-care decision-making commonly raises a red flag with health-care providers, and a dual document may have the same result.

    An agent is automatically entitled to reasonable compensation and reimbursement of expenses under Wis. Stat. chapter 244; the principal need not expressly provide for this.27 The same is not true for a POAHC, which could cause confusion – especially when the agent is the same person for both – when drafting a single document that allows for compensation and reimbursement for some actions but not others.

    A practical consideration is also the client’s desire for privacy. If Clara Client has a dual POAF and POAHC document, then all her authorizations are shared with all recipients. For example, her bank teller may see Clara Client’s wishes concerning end-of-life care, and the hospital or nursing home staff may see Clara Client’s intentions for supporting her family and making gifts.

    One last cause for confusion in dual POAs centers on revocation. Execution of a new POAHC automatically revokes the old one, but the same is not true for a POAF. For a dual document, if revocation is not expressly stated, the entire document might not be revoked and that could cause serious confusion to a medical provider who is asked to accept a partially revoked dual POA for billing purposes and a brand-new POAHC for health-care decision-making purposes.

    Conclusion

    The new Act is a welcome change, containing improvements such as better protections for both the principal and persons asked to rely on the POAF. However, as with any new law, disagreements concerning the law’s interpretation may need to be worked out in the courtroom. This article points to the procedural areas in which potential litigation looms or clarification is needed. The ability to anticipate issues like the trend away from creating dual POAs or how to analyze the meaning and effect in Wisconsin of an out-of-state POAF is vital to best practice. Awareness of these gray areas leads to more careful and appropriate drafting by attorneys, better-educated clients who are more likely to avoid these very issues because they made informed decisions accordingly, and ultimately, less litigation.

    Endnotes

    1 2009 Wis. Act 319.

    2 Wis. Stat. § 244.61.

    3 Wis. Stat. § 244.06.

    4 Wis. Stat. § 244.61(intro.).

    5 Wis. Stat. § 244.09(1).

    6 Wis. Stat. § 244.04.

    7 Wis. Stat. § 244.09(1).

    8 Wis. Stat. § 244.14.

    9 Wis. Stat. § 244.19.

    10 Wis. Stat. § 244.19(4).

    11 Wis. Stat. § 244.62.

    12 Wis. Stat. § 244.19(4).

    13 Wis. Stat. § 244.20.

    14 Wis. Stat. § 244.20(5), (6).

    15 Wis. Stat. § 243.10(1) (2007-08).

    16 Wis. Stat. § 244.05.

    17 Wis. Stat. § 244.19(5).

    18 Wis. Stat. § 244.20(1)(d).

    19 Compare Wis. Stat. § 244.07 with Wis. Stat. § 155.70(10).

    20 Wis. Stat. § 244.07(1).

    21 Unif. Power of Attorney Act § 107 cmt.

    22 Wis. Stat. § 155.70(10).

    23 Wis. Stat. § 244.10(1).

    24 Wis. Stat. § 244.10(6).

    25 Wis. Stat. § 244.11(1).

    26 Wis. Stat. § 155.01(4).

    27 Wis. Stat. § 244.12.

     




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