Legislature looks to make power of attorney more durable

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The state Legislature is considering updates to Wisconsin’s durable power of attorney laws which would provide more protection for principals, agents and third-party institutions.

Proposals in both the Senate (SB 529) and Assembly (AB 704) modernizes current law to give people, especially those that may be incapacitated, a better ability to have their power of attorney documents accepted by banks or other financial entities.

It also establishes a revised statutory form that clearly outlines the responsibilities and limits of an agent in an effort to curb abuses of power of attorney.

Committees in both the Senate (SB 529) and Assembly (AB 704) held public hearings last week on the bills which are based on the 2006 Uniform Power of Attorney Act.

Sen. Fred Risser is a co-sponsor of the bill and a spokesperson from his office said Wisconsin is following the trend of other states that have used the uniform act as a model for changing local statutes.

And attorneys in the trusts and estates and elder law areas say the updates are overdue.

“I think it should already be passed,” said Nowlan & Mouat LLP attorney Carol J. Hatch.

Hatch chairs the State Bar of Wisconsin’s Real Property, Probate and Trust Section, which along with the Elder Law Section is actively supporting the legislation.

In her experience, she said banks or financial institutions often will refuse to honor a power of attorney document because it is deemed outdated or in some cases they ask the principal to sign a new one.

Elder law attorney Benjamin M. Adams said the scenario is common with out-of-state banking facilities.

“It’s one of my favorites,” he said of the tactic. “A bank denies the transaction and says, ‘we need something signed within the last 60 days’.”

Institutions want to avoid liability if an employee green lights an unauthorized transaction, but in a situation where the client is incapacitated, that can be problematic, noted Hatch.

“Legally, the client isn’t able to do anything,” she said. “Then, the family has to go to court and have a guardian appointed, rather than have an institution honor a document which is perfectly valid.”

The proposed changes would safeguard against such acts through a more detailed form which has to be signed and notarized and could be uniformly used by institutions.

In addition, third parties can still refuse to accept the power provided that there is evidence that “the principal may be subject to physical or financial abuse, neglect, exploitation, or abandonment by the agent or a person acting for or with the agent.”

Current law is fuzzy as to how financial institutions are protected if they make an unauthorized transaction.

“For example, if a bank teller accepts a power of attorney document and it turned out the agent didn’t have the authority to make a transaction, the law isn’t clear under what circumstances the teller may accept the document and carry out the transaction,” said attorney Susan Lynn Collins.

A former estate planning attorney, Collins is currently the senior trial counsel at Marshall & Ilsley Trust Company NA and chaired the bar’s study committee on the Uniform Power of Attorney Act.

If passed, Collins said the changes would give banks and other financial institutions some clarity if a document is signed and notarized and there’s no indication anything else is amiss, it can carry out the transaction.

Reduce abuse

The updates would also provide more clarity for agents who are assigned power of attorney.

Adams said agents are often family members who may not fully understand their responsibilities. And that can lead to abuse.

“Some agents assume they can do any darn thing they want to and find out later that they can’t,” said Adams of Adams & Woodrow SC, in Neenah.

The proposed changes would provide clearer guidelines for agents and specify the types of authority that can be granted to an agent, such as gifting.

For example, Hatch suggested that elderly clients can be vulnerable to an agent who “self-steals” by making unauthorized gifts to him or herself.

She said the new law would not allow blanket gifting without being specific, whereas on the current form, it’s simply a matter of “checking a box to grant someone unlimited authority.”

“I think the changes provide a warning, where in the form it says if you violate the power of attorney, you may be held liable for damages,” she said. “I think that will help with abuse.”