The law

Legislation Of The Six (6) Greater States

Legislation of the six (6) Greater States - Ambit & Exclusions

Updated 2 February 2023 · 22 min read

• The legislation has different titles in each state
• The legislation has similarities and differences as between the Six (6) Greater States
• This Wiki contains a Legislation Index
• The legislation governs Powers of Attorney for persons
• Legislation does not govern Powers of Attorney for commercial entities
• The legislation is not easy to understand
• The legislation tends to operate cumulatively
• If the principal has affairs in multiple states relevant considerations are considerably more complicated
• Some Powers of Attorney are excluded from the ambit of the legislation
• The national experience continues to change
• Importance of common law
• It may be possible to include express terms in a Power of Attorney that override the effect of the legislation in limited respects
• It is important to get legal advice about the legislation and any Power of Attorney
• Six (6) Greater States - application/exclusion of legislation
• California - Texas - New York
• Florida - Illinois - Pennsylvania

Legislation Titles

Below are the names of the pieces of legislation in each of the Six (6) Greater States with respect to Powers of Attorney created for persons¹:-

• in California, the Power of Attorney Law (§4000)
• in Texas, the Durable Power of Attorney Act (§751.001)
• in New York, the Statutory Short Form and Other Powers of Attorney for Financial and Estate Planning Article 5, Title 15 (GOB) (§5-1501)
• in Florida, the Power of Attorney Act (§709-2101)
• in Illinois, the Power of Attorney Act (§755-01)
• in Pennsylvania, Title 20, Chapter 56, titled Powers of Attorney (§5601-5614)

The content of the legislation referred to above varies from state to state, although there are similarities.

Opinions may differ as to what constitutes the law in a given state, particularly where legislation is silent.

Differences & Similarities

Under the heading California Compared To Other States are examples of the differences between the legislation of California and the other five (5) of the Six (6) Greater States and under the heading Examples of Similarities are examples of differences and similarities in the legislation of the Six (6) Greater States.

This Wiki Contains A Legislation Index

The Legislation Index in this Wiki catalogues the legislation with respect to around 150 concepts relevant to Powers of Attorney created for persons².

Of course, more than 150 concepts are relevant to Powers of Attorney.

Common law accounts for many principles outside the scope of this Wiki.

The Legislation Index is no substitute for reading the legislation in full and legal advice.³

The Legislation Governs Powers of Attorney For Persons

Five (5) of the Six (6) Greater States have legislation governing durable and non-durable Powers of Attorney created by persons⁴ that are not of a kind excluded from the legislation:

The exception is Texas, where:-

• legislation only governs durable Powers of Attorney⁵
• non-durable Powers of Attorney remain governed solely by common law⁶

Legislation Does Not Govern Powers of Attorney For Commercial Entities

There is no legislation of the kind that exists in respect of Powers of Attorney for persons in respect of Powers of Attorney created by commercial entities.

The Legislation Is Not Easy To Understand

Broadly speaking, the Six (6) Greater States have taken different approaches to the concepts and issues relating to Powers of Attorney for persons.

The Legislation Index illustrates the patchwork approach:-

1. There are more than 150 concepts relevant to Powers of Attorney addressed in the legislation of the Six (6) Greater States
2. Each of the Six (6) Greater States have legislated about a different selection of these concepts
3. Each of the Six (6) Greater States have legislated with respect to around 40-60% of 150 odd relevant concepts
4. A handful of relatively non-contentious respects issues have been approached similarly and many other issues are approached differently
5. In some respects the legislation governing Powers of Attorney created for persons⁷ operates to override any inconsistent common law principle
6. In other respects the legislation governing Powers of Attorney created for persons⁸ may only operate in respect of durable or non-durable Powers of Attorney ⁹
7. Each state has legislated with respect to a different collection of around eighty to ninety (80-90) issues¹⁰

The Legislation Tends To Operate Cumulatively

The common law operates in conjunction with legislation relating to Powers of Attorney for persons,¹¹ to the extent that it is not overriden by legislation.

This includes common law relating to issues like:-

• agency and fiduciary duties
• unconscionable conduct, duress and undue influence and estoppel
• statutory interpretation
• intention to create legal relations
• quantifying damages
• termination

The following references to notions of legislation operating either cumulatively or exclusively may be helpful:

| Florida | §709.2301 provides to the effect “except as provided in legislation governing Powers of Attorney, the principles of law and equity (or perhaps the common law of agency) supplement the legislation” and §709.2303 provides "the remedies under this part are not exclusive and do not abrogate any right or remedy under any other law other than this part.. |
| Illinois | §2-7 states of An agent that violates this Act is liable to the principal or the principal's successors in interest for the amount required (i) to restore the value of the principal's property to what it would have been had the violation not occurred, and (ii) to reimburse the principal or the principal's successors in interest for the attorney's fees and costs paid on the agent's behalf. This subsection does not limit any other applicable legal or equitable remedies.." and §2-10 provides "this Section shall not be construed to limit any other remedies available.." |
| Pennsylvania | §2-7 states of An agent that violates this Act is liable to the principal or the principal's successors in interest for the amount required (i) to restore the value of the principal's property to what it would have been had the violation not occurred, and (ii) to reimburse the principal or the principal's successors in interest for the attorney's fees and costs paid on the agent's behalf. This subsection does not limit any other applicable legal or equitable remedies.." and §2-10 provides "this Section shall not be construed to limit any other remedies available.." |

Affairs in Multiple States

Where a Power of Attorney is inexorably linked to more than one state, how it operates in various states would be a matter of legal opinion.

Differences between the laws of various states may have serious ramifications where a single Power of Attorney is used in more than one state.

These differences may undermine the principal's intentions and in certain instances, the only means to adequately manage difference between laws of various states may be to execute separate Powers of Attorney, limited in the scope of their operation to only govern local affairs on a state-by-state basis.

The implications of the laws of every relevant state would require detailed consideration, together with the principal's circumstances.

Exclusions

Powers of Attorney for certain purposes are excluded from being governed by the legislation operating with respect to Powers of Attorney for persons in the Six (6) Greater States.

Common exclusions include voting proxies and powers coupled with an interest.

As to the meaning of the term "coupled with an interest" the following extract from the Californian decision of Jozefowicz v. Allstate Ins. Co 247 Cal. Rptr. 3d 758, 35 Cal. App. 5th 829 (2019) is useful:

"The Probate Code provisions explicitly do not apply to "[a] Power of Attorney to the extent that the authority of the attorney-in-fact is coupled with an interest in the subject of the power of attorney." ( Prob. Code, § 4050, subd. (b)(1).)...

" 'California decisional law has consistently followed the definition of [a power coupled with an interest] set out by Chief Justice Marshall in Hunt v. Rousmanier (1823) 21 U.S. (8 Wheat.)..: " 'A power coupled with an interest,' is a power which accompanies, or is connected with, an interest. The power and the interest are united in the same person." .. Such a power is irrevocable if there is a ' "coexisting interest in the subject of the agency.".. 'The agency must be created for the benefit of the agent in order to protect some title or right in the subject of the agency or secure some performance to him..

"Because the purpose of a power coupled with an interest is to protect the agent's interest in the subject and its value, this kind of Power of Attorney is not an 'agency' as that term is commonly understood. Rather, the creator of the power relinquishes irrevocably any authority to direct the attorney in fact who is permitted, under such an arrangement, to act solely in his own interests. As is explained in the Restatement Third of Agency, section 3.12, comment b, page 247, a 'power given as security does not create a relationship of agency ... because it is neither given for, nor exercised for, the benefit of the person who creates it. The holder is not subject to the creator's control and the holder does not owe fiduciary duties to the creator.' ( Bonfigli v. Strachan (2011) 192 Cal.App.4th 1302, 1309, 122 Cal.Rptr.3d 447.)"

The Exclusions Table indexes where various exclusions apply in the Six (6) Greater States.

A Special Word About California

The 1994 California Law Revision Commission Report which led to enactment of Division 4.5 of the Probate Code profides useful insight about the nature the applicability of the legislation, stating:

"..The scope of the proposed law is broad, but not unlimited. It applies to durable Powers of Attorney (including durable powers of attorney for health care), statutory form powers of attorney, and any other power of attorney that incorporates or refers to the Power of Attorney Law. A Power of Attorney is defined as a written agency agreement executed by a natural person that grants powers to an attorney-in-fact, and a durable power is one that survives the incapacity of the principal. The effect of these provisions is to avoid unintentional application of the Power of Attorney Law to Powers of Attorney commonly used in business dealings.."

Having cited §4050, the 1994 California Law Revision Commission Report went on to say:

"Section 4050 describes the types of instruments that are subject to the Power of Attorney Law. If a section in this division refers to a “Power of Attorney,” it generally refers to a durable Power of Attorney, but may, under certain circumstances, also apply to a nondurable Power of Attorney. For example, a statutory form Power of Attorney may be durable or nondurable. See Sections 4401, 4404. A nondurable power may incorporate provisions of this division, thereby becoming subject to its provisions as provided in Section 4050(a)(4). Subdivision (b) makes clear that certain specialized types of Power of Attorney are not subject to the Power of Attorney Law. This list is not intended to be exclusive. See subdivision (c). Subdivision (b)(1) recognizes the special rule applicable to a power coupled with an interest in the subject of a Power of Attorney provided in Civil Code Section 2356(a). Subdivision (b)(2) continues the substance of the limitation in former Civil Code Section 2420(b) and broadens it to apply to the entire Power of Attorney Law. See Ins. Code § 1280 et seq. Subdivision (b)(3) restates former Civil Code Section 2400.5 without substantive change and supersedes the second sentence of former Civil Code Section 2410(c). For the rules applicable to proxy voting in business corporations, see Corp. Code § 705. For other statutes dealing with proxies, see Corp. Code §§ 178, 702, 5069, 5613, 7613, 9417, 12405, 13242; Fin. Code §§ 5701, 5702, 5710, 6005. See also Civ. Code § 2356(e) (proxy under general agency rules). Subdivision (c) makes clear that this division does not affect the validity of other agencies and powers of attorney. The Power of Attorney Law thus does not apply to other specialized agencies, such as real estate agents under Section 2373 et seq. As a corollary, an instrument denominated a Power of Attorney that does not satisfy the execution requirements for a power of attorney under this division may be valid under general agency law or other principles. The general rules in this division are subject to the special rules applicable to statutory form Power of Attorney in Part 3 (commencing with Section 4400).."

A Special Word About New York

New York identifies a broad class of excluded Powers of Attorney:-

• §5-1501C excludes from the ambit of the legislation any Power of Attorney “given primarily for a business or commercial purpose”
• §5-1501C identifies classes of Powers of Attorney excluded in other states as sub-classes, resulting in arguably, a larger class than in other states

In New York, interesting questions may arise where a Power of Attorney is used in an estate planning and business context as to how the 'primary purpose test' works.¹²

The National Experience Continues To Change

Most recently, the ULC published the Power of Attorney Act ULC, (2006), being another example of patchwork legislation in the sense explained above.

Some states:-

• have adopted parts of the Power of Attorney Act ULC, (2006)
• have come close to adopting the Power of Attorney Act ULC, (2006)
• largely ignore the Power of Attorney Act ULC, (2006)

Some states have take a relatively novel approach, for example:-

• in Louisiana a Power of Attorney is known as a ‘mandate’, not a Power of Attorney (Art. 2989)

• states like Arizona and the District of Columbia have adopted much shorter legislation than exists in the Six (6) Greater States (see respectively Chapter 5, Article 5; & Title 21, Chapter 21)

• even in the Six (6) Greater States which have legislation with a semblance of being similar we see stark differences, such as:-

  • California, New York, Florida, Illinois and Pennsylvania have legislation governing durable Powers of Attorney and non-durable Powers of Attorney, whereas Texas has not adopted this approach
  • California, Texas and Florida all require inclusion of an expression of durable preference in a durable Power of Attorney, whereas New York, Illinois & Pennsylvania prefer a 'default approach', deeming all Powers of Attorney durable unless they state otherwise

National reform efforts have to date, entirely focused upon Powers of Attorney for persons.

Powers of Attorney for commercial entities receive scant mention.

Importance Of Common Law

Reading legislation relating to Powers of Attorney for persons¹³ is a starting point, in terms of understanding Powers of Attorney.

Common law principles affect the operation of a Power of Attorney, many of which may fairly be assumed to only be known to lawyers who have studied them.

Example Illustrating Effect Of Common Law

Compare the position in California and Texas in respect of termination of a Power of Attorney where:-

• in California, §4155 provides that “the authority of an attorney-in-fact under a non-durable power of attorney is terminated by the incapacity of the principal.."
• in Texas, a Court declined to investigate capacity to determine if earlier loss of capacity on the part of a principal terminated a non-durable Power of Attorney, concluding that where a Power of Attorney had remained unchallenged for a number of years, the right of a certain entity to dispute capacity was lost under a statute of limitations, accepting that the Court did not dispute per se that had the allegation been raised within the limitation period the Court would not have received the claim and determined the proceedings including determining capacity, but equally did not take the view that . ¹⁴

Contracting Out of Legislation

California has addressed in legislation the right to vary operation of the legislation by terms recorded in a Power of Attorney¹⁵.

There may be difficult questions about the extent to which, if at all, a principal may ‘contract out’ of the legislation.

None of the other five (5) of the Six (6) Greater States have legislation that is prescriptive as to the extent to which terms of a Power of Attorney may modify the effect of the legislation

Of all of the Six (6) Greater States, Illinois has the most expansive legislation in terms of favour of the right of a principal to define their Power of Attorney affairs however they see fit, reflecting a liberal approach (see §2-4) .

Importance of Legal Advice

Differences between the legislation of the Six (6) Greater States are significant.

Variations include differences in application, subject matter, depth, approach, terminology and similar.

Legal opinions may vary with respect to the operation and effect of the legislation.

There is no substitite for legal advice.

Six (6) Greater States - Application/Exclusion of Legislation

Set out below are the various 'carve-outs' with respect to operation of the legislation.

The creation of a Power of Attorney that includes for both included and excluded purpose should be avoided, given the confusion and difficulties it would present.

Where it be proposed that an agent perform included and excluded tasks separate Powers of Attorney might be used.

Care would be needed, to consider precisely how the arrangement then works, so as to ensure that the terms of each of the Powers of Attorney accord with the preferences of the principal, when they work together.

California

Commercial Purposes

A person may create a durable or non-durable Power of Attorney for commercial purposes (§4022 & §4120).

§4050 provides that Division 4.5 of the California Probate Code applies to:-

• durable Powers of Attorney
• statutory Powers of Attorney
• any other Power of Attorney that incorporates or refers to Division 4.5 of the California Probate Code or the provisions of Division 4.5 of the California Probate Code

§4050 provides that Division 4.5 of the California Probate Code does not apply to:-

• Powers of Attorney for Health Care governed by Division 4.7
• a Power of Attorney coupled with an interest in the subject of the power (such as most irrevocable Powers of Attorney)
• Powers of Attorney in the context of reciprocal or interinsurance exchanges
• a proxy to exercise voting rights (perhaps with respect to management of an entity if this limitation is read in line with the approach taken in other states which may or or may not be appropriate)

Certain indicia suggests that Powers of Attorney may be able to be created by a commercial entity.

In California, §4050 states:-

This division applies to the following:

(1) Durable powers of attorney, other than powers of attorney for health care governed by Division 4.7 (commencing with Section 4600 ).

(2) Statutory form powers of attorney under Part 3 (commencing with Section 4400 ).

(3) Any other power of attorney that incorporates or refers to this division or the provisions of this division.

Failure to incorporate or refer to Division 4.5 in a non-statutory non-durable Power of Attorney might produce a non-statutory non-durable Power of Attorney that is not subject to Division 4.5.

Other Legislation

Other legislation may also be applicable (as recognized in §4051), such as:-

• §2019, §2020, §2021 and §2022: requiring an agent to keep the principal informed of their actions, collect negotiable instruments (i.e. cheques) promptly and not exceed the agent's authority (§2019, §2020 and §2021) and specifically excludes a sub-agent of an agent from liability to the principal (§2022)
• §2295, §2296 and §2297: dealing with what constitutes an agent, who may be an agent and distinguishing certain types of agents having regard to the scope of their authority.

Texas

Commercial Purposes

A non-durable Power of Attorney for commercial purposes is not governed by legislation.

§751.0015 states that Subtitle P of Title 2 of the Texas Estates Code applies to all durable Powers of Attorney except:-

• a Power of Attorney coupled with an interest in the subject of the power (such as most irrevocable Powers of Attorney)
• a Medical Power of Attorney
• a proxy or other delegation of voting rights with respect to management of an entity
• a Power of Attorney contained in a form used by a government agency

In Texas there is no legislation governing non-durable Power of Attorney and so:-

• non-durable Power of Attorney cannot be said to be the subject of any legislation; although
• it is fair to say that some principles captured in the legislation applicable to durable Powers of Attorney apply to non-durable Power of Attorney, such as for example, the notion that the act of an agent is binding upon the principal which is codified in §751.051 and could not be disputed as forming part of the common law applicable to non-durable Power of Attorney.

Certain indicia suggests that Powers of Attorney may be able to be created by a commercial entity.

New York

Commercial Purposes

§5-1501 states that the legislation applies to any Power of Attorney except Powers of Attorney excluded from the ambit of the legislation by §5-1501C.

§5-1501C excludes from the ambit of the legislation any Power of Attorney “given primarily for a business or commercial purpose” in respect of which insight is contained in §5-1501C which cites examples including: a power coupled with an interest in the subject of the power, a power to benefit a creditor, a power to transfer or dispose of an asset, a proxy to exercise voting rights in respect of management of an entity, a power authorizing a third party to file a document with a government agency a power for accepting service of process, selling real property and similar.

The exclusion cited above with respect to Powers of Attorney that are “given primarily for a business or commercial purpose” is a somewhat broad exclusion, of a kind also seen in Florida in respect of “Powers of Attorney created other than by an individual”, both being broad exclusions of a kind not repeated in legislation in states like Texas, California, Illinois or Pennsylvania.

Certain indicia suggests that Powers of Attorney may be able to be created by a commercial entity which also may fall within the terms of the exception referred to above.

Florida

Commercial Purposes

Legislation governs durable and non-durable Powers of Attorney created by a person for commercial purposes (§709.2102 & §709.2103).

§709.2103(4) expressly excludes from the ambit of the legislation the following commonly excluded Powers of Attorney:

• a proxy or other delegation of voting rights with respect to management of an entity
• a Power of Attorney coupled with an interest in the subject of the power
• a Power of Attorney contained in a form used by a government agency

§709.2103(4) contains some less common exclusions, in respect of powers to facilitate transfer of a specific stocks or bonds, powers authorizing a financial institution to act as an agent in executing trades or transfers of cash or securities and delegation of powers by a trustee under §736.0807.

In addition however, §709.2103(4) also expressly excludes “Powers of Attorney created other than by an individual” which is a broad and unusual exclusion.

The broad exclusion in respect of “Powers of Attorney created other than by an individual” renders Florida perhaps the most affirmative state in terms of recognizing the right of a commercial entity to create a Power of Attorney, given other states like New York, Texas, California, Illinois and Pennsylvania makes no clear mention of Powers of Attorney created by commercial entities in the legislation.

Illinois

Commercial Purposes

Legislation in Illinois governs durable and non-durable Powers of Attorney created by persons.

§2-4 states that the legislation:-

• governs “every agency, whenever and wherever executed” and to apply to “all agencies exercised in Illinois and to all other agencies if the principal is in Illinois at the time the agency is signed or at the time of exercise or if the agency indicates that Illinois law is to apply”
• applies to “every agency” be governed by Article II, Sections 4-1 to 4-9 and Section 4-11 of Article IV"
• does not apply to certain Powers of Attorney for the benefit of certain financial institutions being powers of kinds excluded more generally in other states, such as powers dealing with proxies for voting rights, powers to transfer specific assets and similar.

Certain indicia suggests that Powers of Attorney may be able to be created by a commercial entity.

Pennsylvania

Commercial Purposes

Legislation governs durable and non-durable Powers of Attorney created by persons (§5601.1).

However, §5601(e.1) excludes the operation of certain provisions (notably provisions dealing with witnessing, inclusion of certain notices and similar) from application to the following types of Powers of Attorney:-

• a power contained in an instrument used in a commercial transaction
• a power coupled with an interest in the subject of the power or for the benefit of a creditor
• a power to facilitate transfer of stocks, bonds or other assets
• a power contained in governing document for a corporation, partnership, limited liability company or other entity
• a power authorizing a director, shareholder, partner or similar to do things on behalf of an entity
• a proxy or other delegation of voting rights with respect to management of an entity

Certain indicia suggests that Powers of Attorney may be able to be created by a commercial entity.

It may be that the exclusion from the ambit of the legislation of Powers of Attorney used “in a commercial transaction which authorizes an agency relationship" as referred to in §5601(e)(1.1)(i) excludes from the ambit of the legislation Powers of Attorney created by a commercial entities.