A power of attorney is a highly customizable document that permits an individual (the “principal”) to appoint someone (the “agent” or “attorney-in-fact”) to act on the principal’s behalf. The power granted to an attorney-in-fact can be either very narrow, such as when the power is limited to a specific transaction, or incredibly broad.
Sometimes power of attorney documents will be separated by purpose, with one document appointing an agent to make financial decisions on the principal’s behalf, while a separate document appoints an agent to make medical decisions. In other cases, both financial and medical decision-making powers are granted to an agent within the same document.
While powers of attorney made in Washington are highly customizable, they are nonetheless subject to certain legal requirements. Since 1985, powers of attorney have been governed by Washington’s Power of Attorney Act, RCW ch. 11.94. Elder law advocates, however, had expressed concern that the Act lacks sufficient detail, does not properly address abuse of an agent’s power, and does not provide satisfactory reassurances to third parties.
Due to these concerns, the Legislature recently passed the Uniform Power of Attorney Act (SB 5635), which was signed into law by Gov. Jay Inslee in April. The new law will take effect on January 1. The Act is modeled after the overarching Uniform Power of Attorney Act (UPOAA), which has been adopted in 18 states. This article examines the key changes coming with Washington’s new Uniform Power of Attorney Act.
A legal document such as a power of attorney is often subject to certain “execution requirements” or other procedural formalities necessary to make that document valid under the law. The key change in the new Act is that either notarization or two witnesses are required to validate a power of attorney.
Current Law: No execution requirements. The law was silent on what was necessary to make the power of attorney valid, although the signature of the principal was a natural prerequisite of a valid document.
New Law: The principal must sign before either a notary or two disinterested witnesses. The witnesses cannot be related to the principal by either blood or marriage, and cannot be health care providers for the principal at the principal’s home or long-term-care facility.
Takeaway: Be sure to adjust power of attorney forms to include either a notary’s signature or the signatures of two disinterested witnesses.
An Agent’s Duty
Because the agent/attorney-in-fact often has broad powers to make financial and/or medical decisions for the principal, the new Act has imposed certain duties upon those who wield this power.
Current Law: Silent as to the duty imposed on agents. The Washington courts have established that an attorney-in-fact is nonetheless held to the highest fiduciary standards.
New Law: The Act imposes a specific list of duties upon the agent, including the duties to act in accordance with expectations of the principal, in the principal’s best interest, in good faith, loyally, with care, competence and diligence, etc.
Takeaway: Ensure that agents acting under a power of attorney understand their duties. While the new law allows drafters to eliminate certain duties from applying to the agent, the law makes it impossible to remove the duty to act in good faith, in the principal’s best interest, in accordance with the principal’s expectations, and within the scope of authority granted.
The law also provides that, while the language of a power of attorney can relieve an agent of certain types of liability, an agent will always face liability if: (a) the agent acted dishonestly, with an improper motive or with gross negligence to the purposes of the power of attorney or the best interest of the principal, or (b) the agent was inserted as a result of an abuse of a confidential or fiduciary relationship with the principal.
Effect of Divorce on Spousal Agent
It is a fairly common practice to appoint a spouse or domestic partner as one’s agent under a power of attorney. In these cases, the law takes account of situations in which a marriage or domestic partnership has broken down, and recognizes that the principal very likely no longer would want the agent to act on his or her behalf.
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