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Ideas for Powers of Attorney

Ideas for Powers of Attorney

Updated 2 February 2023 · 13 min read

Ideas For Powers Of Attorney

Appointing Family Members as ‘Managers’

A principal might:-

• appoint certain family members as their agents
• authorize their agents to appoint sub-agents, subject to certain class conditions, limitations and directions
• tailor the role of sub-agents using limitations and directions

This sort of arrangement might be structured so that family members:-

• supervise sub-agents performing those tasks
• perform those tasks themselves if they see fit, perhaps in specific circumstances
• only perform tasks themselves in exceptional circumstances
• only appoint a suitably qualified and insured professional as a sub-agent

'Changing The Guard’ Upon A Date

Two Powers of Attorney might operate respectively on opposite sides of a critical date to allow a ‘changing of the guard’.

For example, imagine an arrangement under which the ‘critical date’ is for each party to the marriage, their spouse’s 72nd birthday and use of following two Powers of Attorney and eachg spouse executes a Power of Attorney along these lines, where the same date is inserted in each Power of Attorney, being the 72nd birthday of their spouse:-

In a variation of this arrangement, perhaps under the Second Power of Attorney, their spouse may also be appointed an agent, with authority to act independently, whilst the children may only act by agreement (either with each other or perhaps also with the spouse, or perhaps under a ‘majority’ arrangement , such that a child may only act ‘by majority’, defined to mean with at least one co-agent unless there is only one eligible and appointed agent).

Under this arrangement:-

• each party’s spouse would remain as their ‘primary’ agent until they spouse achieved 72 years of age

• on the spouse’s 72nd birthday:-

  • the principal’s children would assume the role of being the ‘primary’ agents
  • the principal’s children would be appointed, on terms designed for that stage of the principal’s life

This kind of arrangement may be structured so that the principal’s spouse may also perform tasks under the Second Power of Attorney.

Using A Government Form In Conjunction With A Custom Power of Attorney

To achieve particular outcomes it may be best to use two Powers of Attorney, namely a  government form and a custom-made Power of Attorney.

For example, the custom-made Power of Attorney may be created to include a direction, to the following effect:

“…agents appointed under the Power of Attorney are authorized to use the Power of Attorney in the shape of a government form executed by me and bearing the same date as this Power of Attorney, solely for the purpose of fulfilling the terms of this Power of Attorney…”

The government form may or may not include reference to the custom-made Power of Attorney, depending upon how the principal wants to structure their affairs.

This sort of arrangement means that for example, the custom-made Power of Attorney might be expressed to commence at precisely the same time that the government form is certified to commence, so as to take advantage of certifications with respect to commencement.

For example, the custom-made Power of Attorney might say, so to speak:-

“this [custom made] Power of Attorney commences at the same as the government form bearing the same date..”

Using A Durable and Non-Durable Power of Attorney

By creating a durable and a non-durable Power of Attorney, a principal can operate two different regimes.

One regime operates up to any point in time that the principal has capacity and the other commences at any time that the principal loses capacity.

This sort of arrangement permits the principal to:-

• include checks and balances in the durable that are suitable if the principal lacks capacity
• ensure that prior to the principal losing capacity, their affairs are subject to checks and balances suitable for when the principal has capacity

The idea below titled Using Two Powers of Attorney is a variation on this idea.

Using Two Powers of Attorney

A principal might create two durable Powers of Attorney, prescribing two different regimes.

The suggested definition of the term “at any time during any period” in the Case Study - Between Two Dates may be helpful in constructing these terms.

Option 1

The first regime may be designed to work if the principal has capacity and the other if the principal lacks capacity.

Casting them both as durable Powers of Attorney:-

• one might be described as operating at any time during any period that the principal has capacity
• one might be described as operating at any time during any period that the principal lacks capacity

Potentially, for example:-

• the one operating at any time during any period that the principal has capacity might authorize one agent to act by independently
• the one operating at any time during any period that the principal lacks capacity might authorize two or more agents to act by agreement

Option 2

Alternatively, for example:-

• the one operating at any time during any period that the principal has capacity might authorize one agent to act by independently
• the other might operate whether or not the principal has capacity, authorizing the agent who is authorized to act independently if the principal has capacity to act by agreement with certain other agents

Analysis

Under this arrangement, if the agent who is authorized to act independently at times when the principal has capacity is confident that the principal has capacity they may act on their own and if that agent is unsure if the principal they can prefer to act by agreement with other agents per the second Power of Attorney.

Central to this kind of arrangement may be a need to ensure the Powers of Attorney substantially mirror each other in various respects, for example with regard to the tasks authorized to be performed under the Powers of Attorney.

Using A Durable Power of Attorney To Remove Consideration of Capacity

Considerations relevant to a Power of Attorney are inherently simpler where the principal authorizes an agent to act whether or not the principal has capacity.

This approach means that capacity of the principal is unlikely to be an issue of any magnitude at any time during the life of the Power of Attorney.

A principal who wants to further minimise this risk might for example, ensure that a suitable medical report is obtained at the time they create the Power of Attorney, confirming their capacity at the time at that time.

By comparison, an approach for example whereby an agent may only act if the principal has capacity or only if the principal lacks capacity means that:-

• the capacity of the principal is inherently more likely to or capable of potentially being an issue in a litigated dispute
• an  agent needs to be mindful of the  capacity of the principal at all times
• an  agent may find themselves liable in respect of any action taken at any time that principal has or lacks capacity, whichever be applicable

It may be sensible for a principal to create a Power of Attorney that under which an agent may only act if the principal has capacity or only if the principal lacks capacity, depending upon the needs and preferences of the principal.

Including Checks And Balances

Inclusion of checks and balances might be useful.

Checks and balances include provisions dealing with:

• access to records and disclosure of information (ensuring copies of the Power of Attorney and relevant records are accessible to key persons)
• notification regimes (for example, requiring agents to notify key persons if they appoint a sub-agent or perform a transaction involving more than $20,000 etc.)
• review procedures including record keeping reviews
• other risk management initiatives

Notably in New York,¹ a person may appoint a monitor with authority to inspect accounts and similar.

This is unique as within the Six (6) Greater States.

In the other states, there is nothing to prevent a principal from creating a Power of Attorney under which an agent is given similar authority to a monitor in New York.

Checks and balances may be particularly useful when creating a durable Power of Attorney.

Options with respect to checks and balances are explored under the heading There Are Risk Management Practices Involving The Terms Of The Power of Attorney.

Using Multiple Powers of Attorney Conditional On Availability Of A Key Person

If a key person is integral to the affairs being the subject of a Power of Attorney it may be helpful to use two Powers of Attorney:-

• one operating if the key person is eligible and appointed; and
• the other to operate if the key person is not available

The two Power of Attorney might for example, contain directions along these lines:-

Relevant wording might include:-

• suitable termination provisions
• definition of the word “operate” and other terms in the Power of Attorney²

Using Conditions to Control Outcomes

Conditions control the right of a candidate to be appointed as an agent.

For example, a principal might appoint a grandchild as a successor agent) on terms that they become entitled to have certain expenses paid for them (i.e. educational expenses), for as long as they continue to act in a manner consistent with achieving that qualification by say, 25 years of age

This sort of a scheme would operate as an incentive for grandchildren, who would have their education or perhaps other expenses paid, if they enter university and any time thereafter, as long as they remain committed to acting as an agent if required.

Considerations relevant to this sort of arrangement might include:-

• entitling them to these expenses prior to them accepting appointment or acting as a successor agent, their payment being a ‘special’ task
• entitling them to these expenses if and when they accept appointment or acting as a successor agent
• limiting the payment of these expenses where for example, they fail to continue to act in a manner consistent with acquiring their qualification by their 25th birthday

Using Insight From The Legislation

It may be useful to consider the content of the legislation in the various Six (6) Greater States when drafting particular provisions in a Power of Attorney, for example:-

• §4238 in California deals with production of accounts in considerable detail, identifying precisely what an an agent must produce
• §5-1507 in New York discusses a procedure with respect to how an agent should execute documents on behalf of the principal
• the various duties imposed upon agents under the legislation of the Six (6) Greater States
• the specific wording in Pennsylvania dealing with “power to make additions to an existing trust” (see §5603©)

There are many more examples in this Wiki.

Using Directions To Control Outcomes

Example 1 - Directions Relating to Transactions

Power of Attorney

A principal might appoint, for example:-

• two (2) agents with authority to perform three specified tasks
• three (3) potential successor agents who are authorized to replace an agent who becomes ineligible

Directions

A principal might prescribe in the Power of Attorney:-

1. any agent who intends to enter any transaction involving more than $100,000 must notify all other agents:-
   (a) of their intention to perform the transaction; and
   (b) when the transaction has been completed
2. the Power of Attorney terminates on 27 June 2035, unless certain events have occurred
3. no agent is authorized to perform any transaction involving sale of the principal’s primary residence without written consent from the principal’s spouse (or any agent or manager of their estate, if their spouse lacks capacity); and
4. the equity of the principal realized on sale is to be applied less sale-related expenses to:-
   (a) any new primary residence of the principal; or
   (b) if the principal is in care, to any primary residence of the principal’s spouse
   © in further default towards the residence of children (to a certain age) etc.

Conclusion

These directions seem likely to make it more difficult for large transactions to perform outside the purview of all agents and protect the interests of the principal’s spouse.

Example 2 - Further Example of Directions Relating to Transactions

If an agent was authorized to perform transactions on a certain bank account, a direction that:-

• an agent must notify other agents of transactions on the account totalling more than $20,000 in any month
• prior to a certain date transactions cannot be performed on a particular account

Example 3 - Illustration of Comparison with Limitations

A principal might prescribe in respect of a specific agent operating a bank account:-

• a direction that the account may only be accessed to meet expenses related to a specific purpose
• a limitation to the effect that only $1,000 may be withdrawn on any given day

Equally for example, a direction to the effect that only $1,000 may be withdrawn on any given day would seem to cover the same ground as the limitation noted above.

Example 4 - Illustration of Importance Not Conflicting with Legal Principles

Imagine a Power of Attorney in Florida for a person³ that contained a direction to the following effect:-

“…this Power of Attorney is to become effective on 1 January 2042.

In Florida, this Power of Attorney would fall afoul of §709.2108(3), which states:

"…a Power of Attorney is ineffective if the power of attorney provides that it is to become effective at a future date or upon the occurrence of a future event or contingency…”

Using Limitations To Control Outcomes

Example 1 - Limiting Use of Certain Bank Accounts

A principal might authorize a specific agent to operate a specific bank account and:-

• limit access for specific purposes
• limit daily transactions up to a sum, say up to a total of $1,000 on any given day

A principal might:-

• authorize only three (3) of more than three (3) agents to perform transactions upon a certain bank account
• limit one agent to make transactions totalling only up to $1,000 in any given month

Example 2 - Limitations With Respect to Certain Transactions

A principal might appoint two agents with authority to perform three tasks and three potential successor agents who are authorized to replace an agent who becomes ineligible.

The principal might include limitations to the effect that:

1. no task involving more $100,000 be performed without reasonable notice (i.e ideally at least 7 days notice) to every agent
2. no agent receive more than $20,000 by way of remuneration in any given year (perhaps unless certain conditions are satisfied, i.e. working in excess of 120 hours in the given year and subject to certain directions dealing with excess remuneration above $20,000 etc.)
3. no agent authorized to perform any transaction involving sale of the principal’s primary residence unless the proceeds of sale are put towards:
   (a) any new primary residence of the principal; or
   (b) if the principal is in care, to any primary residence of the principal’s spouse
   © in further default towards the residence of children (to a certain age) etc.

Example 3 - Limitations In Conjunction With Third Party Approvals

A principal might limit the authority of an agent to sell assets worth in excess of $50,000, unless a suitably qualified accountant agrees the sale is in the best interests of the principal.