Frequently Asked Questions – Power of Attorney Pitfalls & Pointers

Power of Attorney Pitfalls & Pointers

Rachel Drude-Tomori, Esq., LL.M.

 

Recently I’ve come across several “durable powers of attorney” prepared by lawyers who do not regularly practice in estate planning or elder law. In some instances, the power of attorney does not allow the agent to perform certain acts that the principal intended; in others, improper execution renders the document entirely invalid. Presumably this is because the preparer of the power of attorney is not familiar with the major overhaul Chapter 709 of the Florida Statutes underwent in 2011. As a result, many times, if the principal has become incapacitated, the opportunity to cure the defective power of attorney already has passed, leaving caregivers and loved ones without adequate legal authority to perform on behalf of the principal. Understandably, the need for powers of attorney arises in situations other than estate planning, including for limited purposes, such as in real estate closings. This article is intended to highlight the most significant changes to Chapter 709, as well as to provide “planning pointers” useful for attorneys in all areas of practice, specifically including real property.

On October 1, 2011, Florida adopted its version of the Uniform Power of Attorney Act (2006).[i] Florida’s Power of Attorney Act (the “Act”)[ii] significantly impacted powers of attorney in terms of both execution and content:

Execution. A power of attorney executed in Florida[iii] before October 1, 2011 (a “pre-Act power of attorney”) is valid if its execution complied with Florida law at such time – for general purposes this means the power of attorney must have been signed by the principal and two subscribing witnesses.[iv] Post-Act powers of attorney must be signed by the principal and two subscribing witnesses and acknowledged before a notary public.[v] To ensure acceptance of the power of attorney by third parties, be sure that the witnesses are independent witnesses: financial institutions generally will reject a power of attorney wherein one of the witnesses is the agent named in the document.

Springing Powers of Attorney Eliminated. Post-Act contingent or “springing” powers of attorney are no longer allowed in Florida; however, those in existence prior to the Act continue to be recognized.[vi] Practically speaking, recognition of a pre-Act springing power of attorney will require a physician’s affidavit stating that the principal lacks the capacity to manage property.[vii] Clients requesting springing powers of attorney should be instructed that they are no longer recognized in Florida; however, to mimic the effect of a springing power of attorney, the client and the attorney can enter into a written escrow arrangement whereby the attorney is instructed to release the durable power of attorney to the agent only under certain circumstances.

Super Powers. Perhaps most significantly, the Act creates a list of seven “super powers” that must be separately enumerated and either signed or initialed by the principal in order for the agent to perform them on behalf of the principal:

  • Create an inter vivos trust;
  • Amend, modify, revoke, or terminate a trust created by or on behalf of the principal (but only if the trust instrument also explicitly provides for amendment, modification, revocation, or termination by the agent);
  • Make gifts over and above the federal gift tax annual exclusion;[viii]
  • Create or change rights of survivorship;
  • Create or change a beneficiary designation;
  • Waive the right to be a beneficiary under certain annuities and retirement plans; and
  • Disclaim property and powers of appointment.[ix]

Simply put, if the power of attorney does not separately enumerate these powers with, at minimum, the principal’s initials next to each power, then the agent cannot perform these acts on behalf of the principal.

In the best-case scenario, inclusion of these powers would give the principal’s agent maximum flexibility to respond to changed circumstances, including changes in the tax laws, the principal’s financial well-being and health care needs, as well as the individual circumstances of the principal’s intended beneficiaries. For example, with regard to the power to create an inter vivos trust, if it were in the principal’s best interest, the agent could establish a trust to avoid probate of the principal’s estate or to qualify the principal for Medicaid benefits. As another example, with regard to the power to change a beneficiary designation, if one of the principal’s intended beneficiaries became disabled, the agent could divert life insurance or retirement proceeds otherwise payable directly to the beneficiary to a supplemental needs trust so as not to disturb the disabled beneficiary’s government benefits; another application of this power is that the agent could divert designated proceeds to a spendthrift trust for a beneficiary to guard against a divorcing spouse, creditors, or other predators.

In the worst-case scenario, an unscrupulous agent could abuse these powers to totally dismantle the principal’s estate plan to the detriment of the principal and the principal’s intended beneficiaries. While the Act does provide that an agent must preserve the principal’s estate plan (to the extent actually known by the agent, all relevant factors considered),[x] realistically an agent’s abuse of power may not be discovered until it is too late: the agent may have absconded or become judgment-proof, having expended the misappropriated property. For this reason, it is absolutely imperative that the preparer of a durable power of attorney discuss these “super powers” with the principal and encourage the principal to select an agent who is, above all else, trustworthy. Failure to discuss the inclusion of these powers with the principal ostensibly could give rise to claims of malpractice by the principal and his or her beneficiaries.

If the principal is uncomfortable granting one or more of these powers in the power of attorney, such powers should be deleted or omitted. There is more than one way to accomplish this: some practitioners simply omit the excluded powers from the final document, while others strike through an excluded power in the final document or write “omit” where the principal would have initialed had he or she desired to include it. Some practitioners believe that by implementing the strike-through method, the principal’s intent to exclude a particular power is more evident.

Acceptance by Third Parties. The Act provides guidelines for third parties in accepting or rejecting powers of attorney. Generally, a third party is required to accept or reject a power of attorney “within a reasonable time,” which means four business days for financial institutions.[xi] Third parties may require the agent to sign an affidavit stating that the power of attorney is in full force and effect.[xii] Importantly, a party who improperly rejects a power of attorney may be liable for damages, including attorney fees and costs, incurred in an action to compel acceptance of the power of attorney.[xiii]

Use in Real Property Transactions. When drafting a power of attorney which may be used in real property transactions, the principal’s name should be the same as in any title documents previously recorded in the Official Records to ensure consistency for chain of title purposes: “A good, quick check is to compare the name and signature of the principal in the power of attorney against any name and signature of the principal in the records search.”[xiv] Additionally, Section 695.01(1), Fla. Stat. (2017) requires that a power of attorney used to convey real property must be recorded in order to protect creditors and other certain purchasers for value.[xv]

In order to sell or convey real property using a power of attorney, using a broad term such as “real estate transactions” generally is insufficient; the best practice is to specifically delineate the power to “sell, convey, mortgage, encumber, lease, etc.” in the power of attorney.[xvi]

Regarding the form for signature by the agent, the preferred signature block for insuring purposes is: Patricia Principal, by Alicia Agent, her attorney-in-fact.[xvii] The notary acknowledgment must identify the agent as the person appearing before the notary. The acknowledgment simply may state the agent appeared before the notary, but the better practice is to show that the agent, as attorney-in-fact for the principal, appeared before the notary.[xviii] Lastly, always provide a copy of the power of attorney to the closing agent in advance of the closing; presenting the power of attorney on the day of the closing certainly will cause delays because the closing documents will not have been prepared properly.

[i] Uniform Law Commission, http://www.uniformlaws.org/Act.aspx?title=Power%20of%20Attorney.

[ii] § 709.2101, Fla. Stat. (2017).

[iii] This article does not discuss powers of attorney executed in a foreign state. See § 709.2106(3), Fla. Stat. (2017).

[iv] § 709.2106(2), Fla. Stat. (2017) and see §§ 709.08(1) and 689.01, Fla. Stat. (2010).

[v] §§ 709.2105(2) and 709.2106(1), Fla. Stat. (2017).

[vi] §§ 709.2108(2)-(3), Fla. Stat.  (2017).

[vii] § 709.2108(2), Fla. Stat. (2017).

[viii] See 26 U.S.C. § 2503(b) regarding the federal gift tax annual exclusion, which currently allows an individual to give away up to $14,000.00 per recipient per year without the gifts counting against the individual’s lifetime exclusion from federal estate and gift tax (currently $5.45 million; see 26 U.S.C. § 2010).

[ix] § 709.2202(1), Fla. Stat. (2017).

[x] § 709.2114(1)(a)(4), Fla. Stat. (2017).

[xi] § 709.2120(1), Fla. Stat. (2017).

[xii] § 709.2119(2), Fla. Stat. (2017).

[xiii] § 709.2120(5), Fla. Stat. (2017).

[xiv] Charles Nostra, Evaluating Powers of Attorney for Use in Insuring Real Property Transactions, Concept Newsletter, The Fund, Florida Edition, April 2017, Volume 49, at 44.

[xv] Id. at 45.

[xvi] Id. and see, for example, Dingle v. Prikhdina, 59 So. 3d 326, 327 (Fla. Dist. Ct. App. 2011) (“Generally, the rule is that a power of attorney must be strictly construed and the instrument will be held to grant only those powers which are specified.”) (citing Bloom v. Weiser, 348 So. 2d 651 (Fla. Dist. Ct. App. 1977)).

[xvii] Id. at 46.

[xviii] Id.

 

About the Author: Rachel Drude-Tomori, Esq., LL.M. is the lead Partner in charge of the Estate Planning & Probate Department at Battaglia, Ross, Dicus & McQuaid, P.A. Rachel currently serves as Chair of the Probate Section of the St. Petersburg Bar Association and Administrator of the Thomas E. Penick, Jr. Elder Law Inn of Court. Named a Super Lawyers Rising Star in Estate Planning for 2017 and 2018, Rachel assists business owners, corporate executives, and high net worth individuals and their families to protect their legacies from government and creditor interference through estate planning and wealth transfer techniques.

Six Attorneys at Battaglia, Ross, Dicus & McQuaid, P.A. Receive Super Lawyers Designations

(June 19, 2018 Saint Petersburg, Florida) Battaglia, Ross, Dicus & McQuaid, P.A. one of Tampa Bay’s oldest and prestigious law firms today announced that six of its attorneys have received the 2018 Florida Super Lawyers distinction. Howard P. Ross, Aubrey O. Dicus, and Sean K. McQuaid have all been named to the 2018 Florida Super Lawyers. Caitlin C. Szematowicz, Rachel L. Drude-Tomori, and Andrew R. Pardun have been named to the 2018 Florida Rising Star List.

Each year, no more than five percent of the lawyers in the state are selected by the research team at Super Lawyers to receive this honor.  Super Lawyers, a Thomson Reuters business, is a rating service of outstanding lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement. The annual selections are made using a patented multiphase process that includes a statewide survey of lawyers, an independent research evaluation of candidates and peer reviews by practice area.

“Having six of our lawyers recognized the year of the Firm’s 60th anniversary is a reflection of the respect that we’ve earned within the community”, said Howard Ross B.C.S., Partner and Shareholder at BRDM.

Since 1958, Battaglia, Ross, Dicus & McQuaid, P.A. has been recognized for their skill and experience in handling complex litigation, injury cases, complicated commercial transactions, and corporate matters. While civil and commercial litigation is the firm’s largest area of practice, their work also encompasses business and personal transactions, appellate law, employment law, alternative dispute resolution, wills, trusts and probate, real property and title insurance, as well as criminal defense matters.

Battaglia, Ross, Dicus & McQuaid, P.A. Announces Aubrey Dicus, Jr. Has Been Selected to the Senior Judge Review Board

(April 29, 2018, Saint Petersburg, Florida) Battaglia, Ross, Dicus & McQuaid, P.A. one of Tampa Bay’s oldest and prestigious law firms today announced Aubrey Dicus, Jr. has been named to the Senior Judge Review Panel for the Second District Court of Appeal, the purpose of this board is to periodically review senior judges serving on the appellate court and make recommendations as to their continued employment.

Aubrey O. Dicus, Jr. is President and CEO of the firm and has over 40 years of litigation and appellate experience. Mr. Dicus has been selected as a Woodward and White Publication’s “Best Lawyers in America,” named a Florida Super Lawyer, and maintains a Martindale-Hubbell AV pre-eminent highest rating. He has served as Past President of the St. Petersburg Bar Association and the Pinellas County Criminal Defense Lawyers Association. He is the recipient of the St. Petersburg Bar’s Professionalism Award and Stetson President’s Award.

“The firm is extremely excited to have Aubrey represent the BRDM family. With decades of experience, his extensive knowledge dealing with the most complex cases, and his overall success in the legal field there is no question why he was picked for such a prestigious honor” Said Partner Sean McQuaid.

Battaglia, Ross, Dicus & McQuaid, P.A. One of Tampa Bay’s leading law firms, established in 1958 by founding partner, Anthony S. Battaglia. For over 50 years, the firm has provided personal, timely and cost-effective representation to individuals and businesses in St. Petersburg, in the state of Florida and throughout the U.S. Named “One of the best law firms in America” by U.S. News. The firm is a Tier 1 law firm in their category of Metropolitan law firms. Focused on civil and commercial litigation their work also encompasses business and personal transactions, appellate law, employment law, alternative dispute resolution, wills, trusts and probate, real property and title insurance, as well as criminal defense matters.

Rachel Drude to Speak at Seminar on Elder Care and Medicaid Planning

Battaglia, Dicus, Ross and McQuaid partner Rachel Drude will be speaking at two upcoming Seminars entitled “Elder Care and Medicaid Planning: Everything You Need To Know”.

The first seminar is on November 6th and 7th and takes place at the SpringHill Suites Orlando Airport. You can find more information or register by clicking here: https://www.nbi-sems.com/ProductDetails/77044ER?N=0&ctname=SPKEM%2FR-77044ER%7C

The second seminar is on November 8th and 9th and will be taking place at the Hilton Garden Inn in Tampa Ybor Historic District. You can find more information or register by clicking here: https://www.nbi-sems.com/ProductDetails/77046ER?N=0&ctname=SPKEM%2FR-77046ER%7C

Rachel is looking forward to presenting at both sessions and being available to answer any questions seminar attendees may have. Hopefully you will be able to join her!