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    Offering Clarity and Guidance: New Uniform Power of Attorney for Finances and Property

    Wisconsin’s new uniform power of attorney for finances and property law, which becomes effective Sept. 1, 2010, provides clarity regarding POAs, encourages acceptance of POAs while protecting those who accept them, protects the principal in several important ways, offers guidance to agents, and provides a statutory form.
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    Wisconsin LawyerWisconsin Lawyer
    Vol. 83, No. 6, June 2010

    by Susan L. Collins, Carol J.B. Hatch & John F. Wilcox

    Will and 
Last Testament A Wisconsin married couple – let’s call them Robert and Rose Kelly – properly executed Wisconsin statutory-form durable powers of attorney in 1999. Each spouse named the other as agent; neither named an alternate agent. Each initialed all listed powers but included no special instructions. The powers were effective upon signing.

    Robert now has early-stage dementia. Rose manages the couple’s finances but worries. Although she has photo-copies, she misplaced the original powers of attorney. Recently, Rose heard about a new power of attorney law; she is concerned about the validity of Robert’s document, and she wonders whether she should execute a new one herself.

    Background

    Under common law, a power of attorney is no longer effective when the principal becomes incapacitated. Like most states, Wisconsin adopted the Uniform Durable Power of Attorney Act,1 thus allowing powers of attorney to be made durable – that is, to remain effective when the principal becomes incapacitated. Over the years, most states revised their durable-power-of-attorney statutes to address issues on which the original uniform act was silent – for example, the authority of multiple agents, the authority of a later-appointed guardian, the impact of divorce when the ex-spouse is the agent, and the agent’s power to make gifts. Courts also provided guidance.2

    In 2002, a national study showed a significant divergence in states’ power-of-attorney legislation. In 2006, with input from attorneys, the banking and insurance industries, and elder protection advocates, the National Conference of Commissioners of Uniform Laws adopted the Uniform Power of Attorney Act. The key purposes of the new uniform act are to incorporate changes requested by states and to attempt to strike a balance between the need for flexibility and acceptance of an agent’s authority, on one hand, and the need to prevent and redress financial abuse, on the other. The new uniform act includes an updated statutory-form power of attorney.

    Wisconsin adopted the new uniform act as the Uniform Power of Attorney for Finances and Property Act. The Act becomes effective Sept. 1, 2010, and will be codified as chapter 244 of the Wisconsin Statutes.3

    Structure

    Chapter 244 consists of two subchapters.4 Subchapter I, “General Provisions,” includes definitions and provisions pertaining to the creation and use of powers of attorney. Most of these are default rules that may be altered. Some provisions are mandatory.5

    Subchapter II, “Authority,” contains the default definitions for the powers that a principal may grant to an agent.6 It also details the powers that must be expressly granted.7 This subchapter includes the statutory form8 and a form that the agent may use to certify facts concerning the power of attorney.9

    Understanding the New POA Statutory Form 

    by Mark T. Johnson

    The statutory form, provided in section 244.61 of Wisconsin’s new Uniform Power of Attorney for Finances and Property Act, clarifies aspects of a power of attorney (POA) and includes various default provisions. A principal may depart from the default provisions by using the special-instructions section of the form.

    The statutory form names the principal, agent, and any successor agents. Unlike the prior statutory form, the new form does not require the agent’s signature. Rather, an agent may accept the authority granted by taking action in accordance with the POA or by an assertion or indication of acceptance (signing the POA would be such an indication, but it is not required).

    The statutory form incorporates the titles of the available powers, and the principal initials on the line next to each power he or she wishes to authorize. The complete powers sections of the statutes are an appendix to the form.

    Two addenda supplement the statutory form. One explains the agent’s duties for proper use of the POA. The other is an agent’s certification that may be used to certify facts to anyone asked to honor the POA.

    The numerous default provisions appear in various places, many outside the “fill-in-the-blank” portion of the form. A few of the default provisions are described directly within the statutory form, with cues that the provisions may be altered in the special-instructions section. Some default provisions are noted only in the introductory instructions and others are contained in the “agent’s duty” section. The following parts of the statutory form contain the various default provisions:

    Within the form itself:

    • A POA becomes effective immediately.
    • An agent who is not the principal’s spouse or domestic partner may not use the principal’s property for the benefit of the agent or a person to whom the agent owes an obligation of support.

    Only in the instructions:

    • A POA is durable.
    • A new POA does not revoke a previously executed POA.
    • An agent may receive reasonable compensation.
    • Co-agents may act independently.

    In the instructions and the agent’s duty addendum:

    • If an agent is the principal’s spouse or registered domestic partner, the POA becomes invalid upon termination of the relationship.

    Only in the agent’s duty addendum:

    • An agent owes the principal duties of loyalty; avoidance of conflicts of interest; due care, competence, and diligence; accounting; cooperation with any person authorized to make health-care decisions; and preservation generally of the principal’s estate plan, if known.

    In addition, because the powers to gift or self-deal must be expressly granted, the default rule is that no gifting or self-dealing is allowed. Provisions to allow gifting or self-dealing must be written as special instructions. Because the various default provisions are expressed in scattered parts of the form (or exclusively within the statute, in the case of gifting authority), attorneys should be familiar with the statutes and form and explain the defaults and alternatives to clients for maximum effectiveness.

    The statutory form is a powerful and cost-effective tool for delegating authority through a POA, especially when the principal is well-advised by legal counsel. 

    Mark T. Johnson, U.W. 2008, practices in estate planning, elder law, and family law at Hill, Glowacki, Jaeger & Hughes LLP, Madison. Reach him at mjohnson@hill-law-firm.com.  

    General Provisions

    The definition of incapacity under chapter 244 is consistent with the standard for appointment of a guardian under chapter 54. A person is incapacitated if the person is unable to manage property, finances, or business affairs because of an impairment in the ability to receive and evaluate information or to make or communicate decisions, even with technological assistance. A person also may be considered incapacitated if he or she is missing, incarcerated, or outside the United States and unable to return.10

    Powers of attorney executed in Wisconsin before the Act’s effective date remain valid if their execution complied with Wisconsin law when they were executed. Therefore, Rose need not worry about the validity of Robert’s power of attorney. Nor need she worry about having only a photocopy of Robert’s power of attorney. A photocopy and an electronically transmitted copy have the same effect as the original.11

    Rose should execute a new power of attorney to name an agent other than Robert. Her power of attorney will be durable unless it provides otherwise.12 This significant change from prior law reflects the view that most principals prefer their powers of attorney to be durable as a hedge against the need for guardianship. Also, Rose’s power of attorney will be effective when she signs it, unless the document provides otherwise.13 Prior law was silent on this matter. This new default rule reflects a “best practices” philosophy that any agent who can be trusted to act under a springing power should be sufficiently trustworthy to hold an immediate power.

    Prior law required only that a power of attorney be in writing. Under section 244.05, either the principal must sign the power of attorney, or another individual, in the principal’s

    conscious presence and at the principal’s direction, must sign the principal’s name. Although the principal’s signature need not be acknowledged, an acknowledged signature is presumed genuine.14

    The execution of a power of attorney does not revoke a prior power of attorney unless the subsequent power of attorney expressly so provides.15 Again, prior law was silent on this issue. Sections 244.11 through 244.18 address other matters on which prior law was silent, providing default rules concerning co-agents and successor agents,16 reimbursement and compensation,17 an agent’s acceptance of appointment,18 the agent’s duties,19 exoneration of the agent,20 agent liability,21 and agent resignation.22

    Similar to prior law, unless the power of attorney provides otherwise, the filing of an action for the dissolution or annulment of the principal and agent’s marriage or their legal separation terminates the agent’s authority. The agent’s authority also terminates if the principal and agent’s domestic partnership under chapter 770 is terminated.23

    Section 244.16 enumerates the persons who have standing to petition for review of the agent’s performance or for construction of a power of attorney. Upon motion by the principal, the court must dismiss such a petition, unless the court finds that the principal lacks capacity to revoke the agent’s authority or the power of attorney.

    Encouraging Acceptance, Sanctioning Refusals

    The national survey that prompted the new uniform act found that a majority of respondents had encountered difficulty obtaining acceptance of powers of attorney. To encourage acceptance, section 244.19 protects persons who in good faith accept an acknowledged power of attorney without actual knowledge either that the power is invalid or has been terminated or that the agent is improperly exercising the agent’s powers. This protection is available only if the power of attorney is “acknowledged,” which generally means acknowledged before a notary public.24

    Additionally, a person who is asked to accept an acknowledged power of attorney may request and rely on an agent’s certification, an English translation (if the document uses a language other than English), or an opinion of counsel.25 A person or entity that conducts activities through employees is considered to be without actual knowledge of a fact relating to a power of attorney, a principal, or an agent if the employee conducting the transaction involving the power of attorney is without actual knowledge of the fact.26

    As a complement to section 244.19, section 244.20 specifies when a person may, in good faith, refuse to accept an acknowledged power of attorney. Those circumstances include the following: 1) a request for a certification, translation, or opinion of counsel has been refused; 2) the person has actual knowledge that the agent’s authority has terminated; 3) the person believes that the power is not valid; or 4) the person makes a report to a designated law-enforcement or adult-at-risk agency, stating a good-faith belief that the principal may be subject to abuse.27 It is not a good-faith refusal if a person refuses to accept an acknowledged power of attorney because the document is “too old” or because the person requires that a different form be used.28

    Section 244.20 provides for sanctions for refusals not made in good faith. If, for example, a broker refuses Robert’s power of attorney because brokerage-company policy mandates use of the company’s own form, Rose may ask a court to order the broker to accept the power of attorney and to pay Rose’s reasonable attorney fees and costs.29

    Authorities

    If a power of attorney grants to an agent the authority to do all acts that a principal could do, the agent has the general authority described in sections 244.44 to 244.56.30 Those sections provide detailed descriptions of 13 specific powers. The principal also may incorporate a specific power in full either by referring to the short descriptive term for the power or by referring to the statutory section number.31 The default description of a power may be modified, but if it is incorporated by reference, with or without modification, persons asked to accept the power of attorney have a statutorily defined baseline for the meaning of the power granted.

    Certain types of authority cannot be implied from a grant of general authority and must be expressly granted.32 The actions requiring express authority include 1) making gifts; 2) creating, amending, revoking, or terminating an inter vivos trust; 3) creating or changing rights of survivorship; and 4) creating beneficiary designations.

    If the power of attorney authorizes the agent to make gifts, a default rule prohibits the agent – other than the principal’s spouse or domestic partner – from making a gift either to the agent or to a person to whom the agent owes a legal obligation of support.33 The authority to make gifts also is subject to limits imposed by section 244.57, unless expressly enlarged or limited. Absent modification, the agent is limited to making gifts of no more than the annual federal gift-tax exclusion amount, or twice that amount if the principal and the principal’s spouse consent to split gifts. The agent may make only gifts that are consistent with the principal’s objectives, if actually known by the agent, or if unknown, only gifts that are consistent with the principal’s best interest based on all relevant factors. The relevant factors include the value and nature of the principal’s property, the principal’s foreseeable obligations and need for maintenance, the minimization of taxes, the principal’s eligibility for benefits, and the principal’s personal history of making or joining in making gifts.

    Statutory Form

    Section 244.61 contains the statutory-form power of attorney. As under prior law, the statutory form is optional and is designed for use by lawyers and nonlawyers. It contains plain-language instructions to the principal and agent. The specific powers are listed by statute section heading. Initialing a heading incorporates it into the power of attorney. The full statutory sections are attached to the power of attorney as an appendix so that the principal, the agent, and third parties will know what powers the agent has. Default rules generally may be modified only in the form’s special-instructions section. (Please see the accompanying sidebar, “Understanding the New POA Statutory Form.”)

    Section 244.62 is an optional agent-certification form.

    Conclusion

    Attorneys will want to review their own form durable powers of attorney, not only to update statutory references but also to ensure that the Act’s default rules are modified when appropriate. Although the Act does not require notarization of the principal’s signature, attorneys will want to include acknowledgments because acknowledged signatures carry a statutory presumption of genuineness and because third parties will likely be more willing to accept acknowledged powers of attorney.

    For Wisconsin residents like Robert and Rose Kelly, the hope is that the Act will increase the usefulness of their powers of attorney while protecting the principal, the agent, and those who deal with the agent.

    Susan L. Collins, U.W. 1995, is vice president and senior trust counsel at Marshall & Ilsley Trust Co. NA, Madison; com susan.collins micorp micorp susan.collins com.
    Carol J.B. Hatch, U.W. 1989, is a partner with Nowlan & Mouat LLP, Janesville, practicing in estate planning, probate and real estate; com chatch nowlan nowlan chatch com.
    John F. Wilcox, U.W. 1962, is a sole practitioner in Eau Claire, practicing in real estate, estate planning, and probate; net wilcoxjf sbcglobal sbcglobal wilcoxjf net.

    Endnotes

    1Wis. Laws 1981, c. 313, § 2 (effective May 1, 1982). Wisconsin later also adopted the Uniform Statutory Power of Attorney Act. See 1991 Wis. Act 297, § 8 (effective May 14, 1992).

    2See, e.g., Praefke v. American Enter. Ins. Co., 2002 WI App 235, 257 Wis. 2d 637, 655 N.W.2d 456 (holding that agent’s authority to engage in self-dealing must be specifically authorized in instrument).

    32009 Wis. Act 319, §§ 14-16 (repealing Wis. Stat. §§ 243.07, .10, creating ch. 244 (Uniform Power of Attorney for Finances and Property)).

    4The new uniform act contains four subchapters. Through inadvertence, the subchapter headings for subchapter III (“Statutory Forms”) and IV (“Miscellaneous Provisions”) were omitted from the Act.

    5Among the mandatory provisions are sections 244.14(1)(a) (minimum fiduciary duties of agent), 244.16 (persons who may request judicial construction or review of agent’s conduct), and 244.19 (protections for persons who accept an acknowledged power of attorney).

    6Wis. Stat. §§ 244.44–.56.

    7Wis. Stat. § 244.41(1).

    8Wis. Stat. § 244.61.

    9Wis. Stat. § 244.62.

    10Wis. Stat. § 244.02(7).

    11Wis. Stat. § 244.06(2), (4). Note that the requirements for recording original documents in the office of the register of deeds remain unchanged.

    12See Wis. Stat. § 244.04.

    13See Wis. Stat. § 244.09.

    14Wis. Stat. § 244.05.

    15Wis. Stat. § 244.10(6).

    16Wis. Stat. § 244.11.

    17Wis. Stat. § 244.12.

    18Wis. Stat. § 244.13.

    19Wis. Stat. § 244.14.

    20Wis. Stat. § 244.15.

    21Wis. Stat. § 244.17.

    22Wis. Stat. § 244.18.

    23Wis. Stat. § 244.10(2)(c), (e).

    24See Wis. Stat. § 244.19(1).

    25Wis. Stat. § 244.19(4).

    26Wis. Stat. § 244.19(6). For example, to impute “knowledge” to all branches of a financial institution when only one office has notice of a fact could create an unmanageable burden. Also, for example, privacy regulations may prohibit a trust department from sharing client information with its affiliated bank.

    27Wis. Stat. § 244.20(1).

    28Wis. Stat. § 244.20(2).

    29See Wis. Stat. § 244.20(5).

    30Wis. Stat. § 244.41(3).

    31Wis. Stat. § 244.42(2).

    32Wis. Stat. § 244.41(1).

    33Wis. Stat. § 244.41(2).  




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