Financial Power of Attorney documents have long been used in estate planning to allow a person to appoint a fiduciary to manage that person’s financial affairs. They are often used both in situations where the person granting the power of attorney (the principal) is unable to manage financial affairs any longer or where the principal has the capacity to do so but prefers another to handle those matters. On January 1st, 2018 North Carolina enacted the Uniform Power of Attorney Act, which is codified in the new Chapter 32C of the North Carolina General Statutes. This marks a significant change in the laws concerning Financial Power of Attorney documents in this state and is modeled after the Uniform Power of Attorney Act, which has been enacted in a number of states.
The first significant change is now all Financial Power of Attorney documents have automatic durability. Durability means that the power of the agent acting on behalf of the principal will remain even after the incapacity of the principal. Before this change a power of attorney had to specifically mention durability or the power of attorney would become invalid after the incapacity of the principal.
Terminology has also changed in the new statutes. Formerly the person acting on behalf of the principal was referred to as the “attorney-in-fact” and they are now referred to as “agent.” This clears up some confusion about the use of the term “attorney-in-fact” because many people believed that it meant that the person was actually the attorney for the principal. The term “incapacity” replaces references to “disability” in the old statute, to clarify that a disabled person may still be perfectly capable of managing property and financial affairs. This is particularly important in “springing” powers of attorney which only become effective upon the incapacity of the principal to ensure that the agent’s authority goes into effect at the correct time.
The new statute has also changed the statutory forms and now contains a North Carolina Statutory Short Form Power of Attorney, an Agent’s Certification as to the Validity of the Power of Attorney and Agent’s Authority and finally a North Carolina Limited Power of Attorney for Real Property. This gives a set of forms that any person can use in particular circumstances and be assured that those documents comply with the new statute.
An increasingly common topic in recent years has been elder abuse, including financial exploitation. The new statute helps address concerns that an agent may use their authority to take advantage of the principal. To do this, now certain grants of authority must be expressly granted to the agent by the person signing the Power of Attorney and are not implied from a more general grant of authority. Some of the powers that must now be expressly conferred on the agent are the ability to make gifts of the principal’s property, to change or create beneficiary designations, and renounce or disclaim property.
Nothing in the new statute invalidates prior Power of Attorney documents executed prior to January 1,2018, but it is always important to review all of your estate planning documents to ensure they are accomplishing the goals you have for the management of your affairs both during your life and at the time of your death. The knowledgeable attorneys at Brinkley Walser Stoner are happy to review your current estate planning documents in light of the new changes or to help develop a plan with you should you be in need of estate planning documents including a Power of Attorney.