A power of attorney is a useful estate planning tool that allows an individual (known as the Principal) to designate a representative (known as the Attorney-in-fact) to handle the Principal’s financial affairs in the event that the Principal becomes incapacitated. The power of attorney form itself is contained in Minn. Stat. § 523.23. The Minnesota legislature recently amended the statutory short form power of attorney, with the new provisions taking effect on January 1, 2014.
The amendments only apply to power of attorney documents executed after January 1, 2014, and all power of attorney forms properly executed prior to that date remain effective. This article will briefly describe the relevant changes that have been made and discuss how these changes affect the statute.
The most significant amendments to the form include:
1) Important Notices to the Principal and Attorney-in-fact: The new form includes a detailed notice for both the Principal and the Attorney-in-fact, and both parties are required to sign an acknowledgement that they have read and understood the notice section. The Principal’s notice section describes the purpose of a power of attorney document, the powers granted by the document, the process for terminating the power of attorney powers, and the duties of the Attorney-in-fact. The Attorney-in-fact’s notice section specifies the duties and obligations of the Attorney-in-fact. The purpose of including these notices is to make each party aware of the consequences of the power of attorney document and to help prevent future claims based on lack of knowledge.
2) Required Signature by the Attorney-in-fact: The Attorney-in-fact is now required to sign the short form power of attorney document, whereas in the past, the Attorney-in-fact’s signature was merely optional. As noted above, the Attorney-in-fact must also acknowledge that he or she has read and understood the “Notice” section, making him or her aware of their duties and obligations as the Attorney-in-fact.
3) Health Care Decisions: The statute states that the power of attorney document only gives the Attorney-in-fact power to make financial decisions for the Principal, and does not grant any powers to make health care decisions affecting the Principal. A separate health care directive is required for powers relating to health care.
4) Gifting by the Attorney-in-fact: The provision of the form allowing the transfer of the Principal’s property by the Attorney-in-fact to the Attorney-in-fact was amended. The Principal must check a box on the form to give the Attorney-in-fact the power to make gifts to him or herself, or to someone that the Attorney-in-fact is legally obligated to support. The amount of the Attorney-in-fact’s gifts to him or herself is also limited to the amount of the federal annual gift tax exclusion effective during the year when the gift was made, which currently is $14,000 (2014).
The amendments above are intended to provide greater protection for vulnerable and/or elderly adults, and lessen the potential for abuse by the Attorney-in-fact. The changes are also meant to clarify several of the provisions of the short form power of attorney statute, as well as better inform the Attorney-in-fact about the duties and responsibilities of the Attorney-in-fact.
For those that have already executed a power of attorney or any other estate planning documents, this is a good opportunity to review your estate plan and ensure that your intent is clearly and accurately reflected. For anyone who does not have a power of attorney or Health Care Directive in place, now is a good time to talk with one of our attorneys about the importance of these documents in your estate plan.
Please feel free to contact Tarrant & Liska with any questions you may have about powers of attorney and your estate planning needs.