THE NEW POWER OF ATTORNEY LAW

Photo Credit: HawaiiReporter.com

On April 17, Gov. Neil Abercrombie signed into law the new Uniform Power of Attorney Act. It may be somewhat confusing to people because Hawai‘i already had a law allowing powers of attorney — the old law was called the Uniform Durable Power of Attorney Act. What was accomplished besides taking the word “Durable” out of the law? And does this now mean that powers of attorney can no longer be “Durable?” Also, what does “Durable” even mean within the context of a power of attorney? (For that matter, what is a power of attorney?) I’ll answer all of these questions in today’s column.

A power of attorney is a document that someone signs giving someone else the authority to manage her/his finances and to sign legal documents for her/him. The person signing the power of attorney is called the “principal.” The person with the authority to manage finances, sign documents and to otherwise act on the principal’s behalf is called the “agent,” or the “attorney-in-fact.” This doesn’t mean that the agent has to be a lawyer. A lawyer is an “attorney-at-law,” which means she/he can represent you in court on matters of law. An “attorney-in-fact” does not represent you in court before a judge, but can represent you in other matters, such as opening and closing bank accounts, depositing and withdrawing money, signing contracts, purchasing and selling real estate, buying and selling stocks or anything else that you could do yourself if you were present.

When you have a power of attorney that continues to be valid even after you become incapacitated, we call it “durable” because it lasts, or endures, even through your incapacity. Even though the title of the new law no longer contains the word “Durable,” you can still make a Durable Power of Attorney.

All powers of attorney become invalid when the principal passes away. In other words, even if you have a power of attorney for someone, it is illegal to use it to sign for them or to act on their behalf after they die. Once a principal has passed away, you may need to open a probate with the court to appoint a “personal representative” who will receive authority from the judge to sign and act on behalf of the deceased principal and to manage his or her assets.

As the principal, you always have the right to revoke or cancel your power of attorney to stop your agent from acting on your behalf as long as you are still competent. You may also appoint a new attorney-in-fact (or agent) at any time.

There are quite a few changes in the new Uniform Power of Attorney Act, which, I think, overall, are quite good and advantageous to our clients. I will spare you from all the legal details, as the law is 76 pages long and took many long hours of study to understand properly.

One of the biggest advantages of the new act is that it does not allow third parties to arbitrarily refuse to accept the power of attorney. Some of our clients have experienced going to a major bank with a valid power of attorney or trying to sell a piece of property on behalf of an incapacitated family member, only to learn that the bank or the escrow company would not accept the power of attorney. It has been a major point of frustration. They — and their lawyer — did everything correctly and the power of attorney was properly drafted, but for some unknown reason the financial institution decided not to honor the power of attorney. Our law firm’s clients aren’t the only ones to encounter these problems — almost everyone in the state who has tried to use a power of attorney to manage someone’s affairs has found that there are some institutions that just will not cooperate with them. Thankfully, many credit unions have been more helpful with accepting a power of attorney than most banks have been.

Under this new law, banks, escrow companies and other financial institutions are all obligated to accept and honor a power of attorney unless they have reason to suspect fraud or that something else improper is going on. If they refuse to honor a power of attorney without a reasonable explanation, they will be liable in court for your attorney’s fees when you sue to force them to honor it. And, they can’t just refuse to accept because it’s old or “stale” anymore. There are a number of other great improvements in this new law, but I think this is the most immediately useful improvement for our clients.

So, consider having your new power of attorney prepared in accordance with the new law. You may never have to redo your power of attorney ever again. (At least, as long as you never want to change whom you name as your agents.)

© OKURA & ASSOCIATES, 2014

Honolulu Office: (808) 593-8885
Hilo Office: (808) 935-3344

Ethan R. Okura received his doctor of jurisprudence degree from Columbia University in 2002. He specializes in estate planning to protect assets from nursing home costs, probate, estate taxes and asset protection.

This written advice was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer. (The foregoing legend has been affixed pursuant to U.S. Treasury Regulations governing tax practice.)

This column is for general information only. The facts of your case may change the advice given. Do not rely on the information in this column without consulting an estate planning specialist.