Key Planning Decisions

Key Planning Decisions

Avoid Court

A power of attorney that will escape court proceedings call guardianship is crafted to these, among, other consideration factors:

Durable v. Non-Durable

Under the Unified Power of Attorney Act, a significant change from prior statutes and the laws of virtually all states, a power of attorney is now presumed to be durable, unless it contains express language negating the durability feature. This is why the proposed Virginia Power of Attorney Act’s title is called “Uniform Power of Attorney” and does not contain the word “durable.” A power of attorney can be a durable or nondurable power. Even though the proposed Virginia Power of Attorney Act presumes that the power is durable, it is recommended to expressly state that the power survives the principal’s incapacity.

Immediate v. Springing

The proposed Virginia Power of Attorney Act sets the default rule that the power of attorney is immediately effective unless the principal chooses to create a “springing” power. This is consistent with current Virginia law.

The principal may expressly make the agent’s power begin on a specified date or make it depend on occurrence of a state contingency, such as the principal’s incapacity. If the springing power starts upon the incapacity of the principal, the power of attorney shall designate a specific person to make the determination of incapacity. Under the proposed Virginia Power of Attorney Act, the default rule is that the determination shall be made in writing by (i) the principal’s attending physician and a second physician or licensed clinical psychologist; or (ii) an attorney at law, a judge, or an appropriate governmental official. Under the proposed Virginia Power of Attorney act, a HIPAA release is automatically provided to all of the individuals listed to determine the capacity of the principal.

If the principal fears that an agent will act improperly now, the principal should anticipate that the principal would act improperly later, and select a more trustworthy agent. The practitioner can add language in the power of attorney creating a duty of accounting.

Limited v. General

For recordation purpose, some practitioners execute limited powers of attorney for sale of real estate in addition to a general power of attorney. The limited power of attorney can meet the recordation requirements including the name and address of the drafter on the first page of the power. The short form is easier and cheaper to record and the agent will not have to give the original general power of attorney for recordation. Finally, the recorded short form gives privacy to the principal since the information stated in the power is limited to the real estate property. 

Single v. Co-Agents

The proposed Virginia Power of Attorney Act recognizes that the principal may name co-agents[14] although the general trend is to name one agent at a time because of potential disagreement between agents and the possibility of agents taking inconsistent actions. The Act allows co-agents to act independently. The co-agent is not liable for the actions of another agent unless the agent participates in or conceals the breach of the fiduciary duty. If an agent with actual knowledge of a breach of a fiduciary duty by another agent fails to notify the principal or take reasonable action to safeguard the principal’s interest, he/she will be liable for foreseeable damages, which might have been avoided had the agent acted.

General Powers

The proposed Virginia Power of Attorney Act has statutory definitions 

for authority over various subject areas that may be incorporated by referring to §§ 26-72.04 through 26-72.17 of the Act. These articles define authority granted for real property; tangible personal property; stocks and bonds; commodities and options; banks and other financial institutions; operation of entity or business; insurance and annuities; estate, trusts, and other beneficial interests, claims and litigation, personal and family maintenance; benefits from governmental programs or civil or military service; retirement plans; and taxes. This incorporation by reference should shorten the length of powers of attorney and significantly improve its readability for non professionals.

Special Powers

In order to protect against power of attorney abuses, certain important powers have to be specifically granted[16] such as power to: (1) create, amend, revoke, or terminate an inter vivos trust; (2) make a gift; (3) create or change rights of survivorship; (4) create or change a beneficiary designation; (5) delegate authority granted under the power of attorney; (6) waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan; or (7) exercise fiduciary powers that the principal has authority to delegate. 

The special general powers granting the making of gifts authorizes only the agent[17] to the annual federal gift exclusion under Internal Revenue Code 26 U.S.C. § 2503 (b), as amended[18].  It also allows gifts that are consistent with the principal’s objectives or gifts the agent determines to be consistent with the principal’s best interest based on the following relevant factors: (1) the value and nature of the principal’s property; (2) the principal’s foreseeable obligations and need for maintenance; (3) minimization of taxes, including income, estate, inheritance, generation-skipping transfer, and gift taxes; (4) eligibility for a benefit, a program, or assistance under a statute or regulation; and (5) the principal’s personal history of making or joining in making gifts. 

In addition, the principal may expressly grant the agent greater authority to make gifts.  This authority should be carefully discussed with the client and drafted to meet the client’s needs and desires. 

Statutory Form v. Tailored Forms

The proposed Virginia Power of Attorney Act offers a statutory form of power of attorney and an agent’s certification form. Samples of these forms are attached. The goal of these forms is to promote familiarity and thereby facilitate acceptance of powers of attorney. The statutory form is designed to be understood by lay persons while still providing attorneys a foundation upon which drafting options can be implemented.

The proposed Virginia Power of Attorney Act has made changes from the Uniform Power of Attorney Act. It added an option that allows the appointment of co-agents and successor co-agents, including the ability to specify whether co-agents are to exercise their authority independently, by unanimous decision, or by majority decision. Also, the Act modifies the gifting power incorporated in a specific authority section of the statutory form. The authority to disclaim or refuse an interest in property, including a power of appointment, has been eliminated from the list of authorities which require a specific grant. In addition, the Act added a section that clarifies whether previous powers of attorney were revoked. Finally, it added the notary identification number line.

Suggested Additional Powers.               

Careful consideration should be given to adding a paragraph to provide instructions on the care of the principal in a situation of incapacity. Instructions on the preferences of having home care rather than care at an assisted living or nursing home or authorization to hire a care manager can be included.

Instructions on the care of pets could be added. This provision could vary from instructions regarding the expenses allowed for the care of the pets, to instructions regarding the end of life of the pets.