Beginning July 1, 2017, Georgia’s laws relating to most written, general financial powers of attorney (POAs) created by individuals changed radically. This new set of laws was based on the Uniform Power of Attorney Act (UPOAA), with some modifications. The Georgia Legislature then enacted several technical corrections in 2018. Considering this significant change in Georgia law, we published a three-part Newsletter series in 2017. However, we never got around to updating this Newsletter series after the technical corrections made in 2018.
The goal of this Newsletter is to provide a summary of where we are now as to Georgia’s UPOAA laws.
A. What is a POA and why do you need one?
A POA is one of the legal documents you need as part of a comprehensive (base) estate plan. The other legal documents needed as part of a comprehensive estate plan include an Advance Directive for Health Care (this is Georgia’s health care agency document, but other states use other documents), a Last Will & Testament (Will), and possibly, a Revocable Living Trust (RLT).
A POA is a document in which one party (the “principal”) grants authority to another party (the “attorney-in-fact” or “agent”) to act in the place of the principal regarding economic and financial matters.[1] If you can no longer handle your affairs and you do not have a valid POA, it may be difficult or impossible for anyone else to ensure that your bills get paid, and your myriad other financial matters are properly handled. If your incapacity persists for very long, the services of your local probate court will likely be needed to appoint a conservator. The conservator will be able to handle your financial affairs but will be subject to ongoing court supervision and inflexible rules. Probate court conservatorship proceedings can be time consuming and can often be expensive. If you have a POA in place, you may be able to avoid the need for a conservatorship proceeding altogether, and your agent will not be subject to ongoing court supervision and the inflexible rules that apply to a conservator. In the rare case that you truly have no one that you can or should trust with your financial matters and you are unable to hire a professional (Trust Company) to serve in this capacity,[2] then it may be best to do without a POA and rely on the possible use of a formal conservatorship if you ever do become incapacitated. However, most adults should have a POA as part of their comprehensive estate plan
B. What were the biggest changes made by the Georgia UPOAA legislation and what does this mean for those that want to create a Georgia POA?
- Strict POA signing requirements. Under the Georgia UPOAA, a POA created on or after July 1, 2017 is not legally effective unless is it signed by the principal (maker of the POA) before at least one witness and a notary public.
Meaning? You must be very careful to properly sign (execute) your POA to ensure that it is legally effective. For more information on this topic, see O.C.G.A. Section 10-6B-5.
- Requirement to use the Statutory POA form (or one of the two permissible alternatives) if you want your agent to have a significant new power. If you want your POA agent to have the new power to potentially force compliance with their requests under the POA, then you will need to use the proper POA form. It should be noted that this power is not self-executing but entails a process for the agent to take, and if the third party still refuses to follow an agent’s proper direction then the agent can go to court to force compliance with the agent’s request (subject to certain exceptions). If the agent is successful in the court process, then the third party will be required to follow the agent’s request, will be required to pay the attorney fees and costs of the litigation, and while it is not currently clear, may be required to pay for other damages.
Meaning? You need to be sure that you use either the Statutory Form POA (or one of the two permissible alternatives) to ensure that your agent has this significant power. As discussed below, which POA form is used and what Special Instructions (or other changes) are made is important and should not be taken lightly. For more information on this new power in the agent to potentially force a third party to act, see O.C.G.A. Sections 10-6B-20 through 10-6B-23.
- Important definitions and rules apply even if you decide not to use the Statutory POA form or one of the two permissible alternatives.
Meaning? For those that choose not to use the Statutory Form POA or one of the two permissible POA form alternatives, you still need to be aware that without specific wording to counteract such definitions and rules, these definitions and rules still apply to your POA even if they are not desired. This will likely require careful drafting to be sure your POA works as intended.
- Expanded ability in others to protect you from a “bad actor” agent. Georgia law now expands and clarifies the fiduciary duties that apply to an agent’s actions in order to better protect you (the principal/maker of the POA) and permits pretty much anyone with an interest in your well-being to take court action to protect you if a concern exists as to your agent’s actions.
Meaning? These were important provisions added to Georgia law and one of the primary reasons the Georgia UPOAA was enacted. The fear is that financial elder abuse is a growing problem, and this legislation was part of a package of legislative projects to help protect seniors from this growing problem. For more information on this topic, see O.C.G.A. Sections 10-6B-14 through 10-6B-17; O.C.G.A. Section 10-6B-14; and O.C.G.A. Section 10-6B-11(d).
- Expanded protection for third parties, such as financial institutions, when complying with your agent’s request(s).
Meaning? This expanded protection was needed to reduce liability concerns of financial institutions and other third parties when they carried out a POA agent’s request. With this protection in place, third parties should now be more willing to follow an agent’s request under a POA. For more information on this topic, see O.C.G.A. Sections 10-6B-10(d) and 10-6B-19.
C. What POA form should you use in Georgia?
We believe that your POA form should be “substantially in the form” of or should “substantially reflect[ ] the language” of the Statutory Form POA set out in O.C.G.A. Section 10-6B-70, and we believe this form should include significant permitted modifications. Basically, by using the proper POA form, you give significant additional power to your POA agent, but the POA form set out in O.C.G.A. Section 10-6B-70 needs significant modification to enable it to work as intended while reducing the risk that your agent can ever act in an undesirable manner.
It should be noted that the 2017 legislation only included the alternatives of using the exact Statutory Form POA set out in O.C.G.A. Section 10-6B-70 or a document that “substantially reflects the language” of this statutory form. The 2018 technical corrections legislation added the “substantially in the form” option.
D. How can you draft your POA form using either the “substantially in the form” or “substantially reflects the language” options so that you do not have to use a word for word copy of the POA form set out in O.C.G.A. Section 10-6B-70? For more information on this important topic, see O.C.G.A. Section 10-6B-20 (as a start).
We believe you have three options under current Georgia POA law to use a Georgia Statutory Form POA.
- Exact copy of statutory form. Use the exact wording of the POA form set out in O.C.G.A. Section 10-6B-70.
- “Substantially in the form” POA form. Follow the statutory form set out in O.C.G.A. Section 10-6B-70, and make as few changes as reasonable possible, except for changes made via permitted Special Instructions. The key to this option is the ability to add significant Special Instructions. The Statutory Form POA provides you with three lines to make Special Instructions, but it also permits you to add extra lines, or you can add an addendum or attachment to set out your Special Instructions. This is the option we at Morgan and DiSalvo, PC (M&D) use for our clients. To give you an idea of the extent of Special Instructions we use, the statutory form is nine pages long, and our attached Special Instructions are an additional ten pages.
- “Substantially reflects the language” POA form. The 2018 technical corrections legislation added O.C.G.A. Section 10-6B-20(b) to set out the safe harbor requirements for a document to qualify under this option. Basically, the document must specifically deal with the General Authority powers and the Specific Authority powers in an acceptable manner and then set out the following statement: “Any person, including my agent, may rely upon the validity of this power of attorney or a copy of it unless that person has actual knowledge it has terminated or is invalid.” The benefit of this option is that you can use a form that looks almost nothing like the Statutory Form POA set out in O.C.G.A. Section 10-6B-70 if it includes some required provisions. For those using their own form style with this option, it is important to understand that the statutory definitions and rules still apply. As such, you will need to modify or eliminate their application where possible to extent desired in your POA form.
It may be interesting to note that we originally intended for our M&D POA form to meet the “substantially reflects the language” option before it was modified in the 2018 technical corrections legislation. However, after the 2018 technical corrections legislation, our M&D POA is likely more in line with the “substantially in the form” option, although it likely meets the requirements of both form options.
E. What is by far the most important POA provision?!
We cannot emphasize this point enough. By far, the most important POA provision is who you select as your initial and successor POA agent(s). The one thing an estate planner cannot protect you against, other than educating you, is your making a bad agent (fiduciary) choice. If you give the wrong person this much power over your finances and property, abuse is possible. You should only choose what we call “perfect” people for fiduciary positions such as this.
Who are these perfect people? Perfect individuals for this position meet the following criteria: (i) honest and trustworthy beyond any doubt; (ii) responsible type of person who will figure out what needs to get done and get it done in a reasonable period of time (while getting whatever help is needed); (iii) would not mind doing this job (which could end up being some significant hassle); and (iv) do not have a significant conflict of interest which could affect their judgement or cause conflicts with other family members. If the best person for the job is not convenient in location but another choice is more convenient as to location, go for the best person and only go with convenience if the two individuals are even in fit for this position. It is normally prudent to have an initial POA agent and at least one (but preferably two) successor POA agents. If you do not have enough perfect people for this position, then you should consider using a professional (Trust Company). A high touch, high service Trust Company can be a sure thing, but it will require you to use an RLT as your primary estate planning document.
F. How often should you update your GA POA?
Georgia POA documents do not expire on their own (unless you add in such a provision), but a risk exists that as the POA gets older it may become more difficult to get third parties, such as financial institutions, to accept them. Yes, if you use the proper form POA signed in the proper manner on or after July 1, 2017, the agent should have the potential ability to force a third party to do what they are asking under the POA. However, this may entail hassle, delay, costs, and possibly, litigation. As a result, we believe best practices should be the same as they were before the enactment of the Georgia UPOAA. Specifically, we believe you should update your POA about every three years or so to ensure that it remains fresh (fairly new) and, thereby, more easily accepted by third parties if and when your agent may actually need to use it on your behalf.
It should be noted that third parties are not out to be difficult in refusing to accept older POAs. Rather, they have someone come before them and ask to deal with your account / assets. They may have thousands or millions of customers, and they do not know you and your agent personally. They are fearful that the agent may not be acting in your best interests, and they do not want to end up in a lawsuit if they ended up helping your agent commit financial abuse on you. The goal of updating your POA about every three years is so third parties will more likely believe that your agent is currently trusted by you, and as a result, they can more safely trust your agent as well.
If you need assistance in preparing your POA under current Georgia law or have other estate or tax planning questions or concerns, we are here to help. Please contact our office administrator at (678) 720-0750 or info@morgandisalvo.com to schedule an appointment.
[1] A POA can technically be described as a general (not limited to specific transactions or other limited purpose), financial (deals with all types of financial and property matters), durable (it continues even if you become incapacitated) power of attorney (appoints an agent to act on your behalf).
[2] While most Trust Companies refuse to serve as an agent under a POA, several will do so if (i) you use a Revocable Living Trust (RLT) as your primary estate planning document, (ii) the Trust Company is also made the Trustee of your RLT at least by the time the Trust Company is to serve as your POA agent, and (iii) the Trust Company is not able to serve as your POA agent unless and until you are determined to be incapacitated in accordance with the requirements set out in your POA.
