Articles

Durable Powers of Attorney in Maine

What is a Durable Power of Attorney:
A power of attorney is a document in which one person, the “principal”, appoints another person, the “agent”, to act on his or her behalf, conferring authority on the agent to perform certain acts or functions on behalf of the principal.  A power of attorney is “durable” if it continues in effect even if the person who created it becomes disabled or incapacitated.

Durable Powers of Attorney are for Everyone:
All should plan for the possibility that they may become disabled or injured, and their spouses, children, or other loved ones will need legal authority to manage their property, transact their business, and pay their bills.

Durable Powers of Attorney are Simpler and Less Costly than Conservatorships:
Although Maine law does provide a means of managing a disabled person’s property through a court ordered and supervised conservatorship, the legal requirements for setting up a conservatorship are complex and time consuming.  The conservator must also post a surety bond and file annual reports or accounts with the Court, which can be costly and time consuming.

A durable power of attorney can avoid the cost and complexity of guardianship and conservatorship proceedings, as the agent can act generally without the need for court appointment and supervision.

There are Risks in Unlimited Durable Powers of Attorney:
There are dangers in granting unlimited durable powers of attorney because the agent may act in his or her own self-interest, and not consider the welfare or wishes of the principal.  For example, with unlimited power, the agent could convert the principal’s property to the agent’s own use or treat the principal’s property and finances in a way that adversely affects the principal’s will or estate plan.

As of July 1, 2010, Maine has a New Law on Durable Powers of Attorney:
The Maine Legislature recently passed a law, effective July 1, 2010, 14 M.R.S.A. §§5-901 to 5-964, to better define the powers and duties of the agent acting under a durable power of attorney.

  • Powers of Attorney Are Now Presumed to be Durable:

Under the new law, a power of attorney is presumed to be durable unless it states that it is terminated by incapacity.  This is a major change from prior law, which presumed that a power of attorney was not durable unless it expressly so provided.

  • Powers of Attorney Now Require the Principal’s Signature:

The new law also requires a power of attorney to be signed by the principal, or signed in the principal’s presence, by someone directed by the principal to sign the principal’s name.  This is a significant clarification which expressly allows someone other than the principal to physically sign the document. A power of attorney must be notarized to be effective in Maine.

As under prior law, powers of attorney in Maine must still contain specific language providing notice to the principal and notice to the agent warning both principal and agent of their obligations and liabilities under Maine law.

A power of attorney is presumed to be effective when it is signed and acknowledged unless it states that it will become effective on a future date or upon the occurrence of a contingency such as incapacity or disability.

  • In Some Cases, the Power of Attorney is Now Effective upon a Doctor’s or Other’s Statement of Disability:

The principal may designate an individual to determine whether the disabling event or other “contingency” has occurred to trigger the power of attorney.  Where powers of attorney become effective upon incapacity or disability, if the principal has not stated otherwise, the power of attorney becomes effective when a physician, attorney, judge or other governmental official states in writing that the principal is incapacitated.  This is a substantial change in the law.

  • In Some Situations, the Power of Attorney will Now Terminate by Law:

The new law also states when a power of attorney terminates.  For example, the filing of an action for annulment, legal separation or divorce will terminate the authority of a spouse designated as the agent under a power of attorney.  Marriage or entry into a domestic partnership will also potentially terminate the authority of the agent.

  • The Agent Acting Under Power of Attorney is Now Entitled to Compensation:

The new law makes clear that an agent acting under power of attorney is entitled to receive reasonable compensation and be reimbursed for expenses.  Compensation is determined under the same standards as apply to personal representatives.

The new law also allows for two or more persons to be co-agents, acting either jointly or singly, and for successor agents, and it more clearly defines the rights and obligations of a successor agent.

  • The Agent Acting Under Power of Attorney Has Broad Fiduciary Duties:

A very important feature of the new law is §5-914, which defines the duties of an agent acting under power of power attorney to include the duty to act in good faith, be loyal to the interests of the principal, avoid conflicts of interest, act with care, competence and diligence, keep accurate records of all receipts and disbursements, cooperate with holders of health care authority, and endeavor to preserve the principal’s estate plan.  These powers are very significant, imposing some broad fiduciary duties on the agent very similar to those imposed upon trustees under the Maine Trust Code. The new law defines precisely the extent of the agent’s liability for a breach of the agent’s duty.

  • Third Parties Who Accept and Act Upon the Agent’s Power of Attorney Now Have Greater Statutory Protections:

The Maine power of attorney act contains an important new feature with respect to the obligation of third parties to accept and act upon a power of attorney. This addresses a problem which often arose under the old law by which a financial institution or other third party refused to accept the authority of the agent to act for the principal.  In addition, third parties who accept the authority of an agent acting under power of attorney now have greater statutory protections.

  • The Kinds of Transactions an Agent May Enter Into are Now Specified in Detail:

The core of the new law appears in §§5-931 through 5-947, which define in great detail the kinds of specific transactions into which an agent may enter.  This allows the drafter of the power of attorney to define specifically what transactions an agent may undertake, such as dealing with real estate, tangible personal property, stocks and bonds, commodities and options, banking and financial institutions, operating business entities, insurance and annuities, estates and trusts, claims and litigations, personal and family matters, governmental benefits, retirement plans, taxes, and gifts.

If explicitly stated, a power of attorney may authorize the agent to create, amend or revoke an inter vivos trust (i.e., a trust created during one’s lifetime), make a gift, create or change rights of survivorship, change beneficiary designations, waive the principal’s rights under an annuity plan, disclaim property or exercise fiduciary powers on behalf of the principal.  The new law allows the drafter to pick and choose the powers granted and may include all powers or only limited powers.  The explicit statutory statement of powers will make it easier for a third party to be sure that the agent is authorized to engage in a particular transaction.

Anyone who wants to take advantage of Maine’s new durable power of attorney statute should contact his or her lawyer to have a new power of attorney prepared.