For People on the Verge of Drafting Their First Estate Planning Power Of Attorney Document

Caring for incapacited loved ones or elder relatives often means stepping in their shoes when circumstances arise where they cannot make sound decisions on their own. A power of attorney (POA) can support this responsibility by giving you the legal capacity to act and decide in situations where you normally cannot.
Power of attorney instruments grant you (the agent), the authority to act on behalf of another (the principal) in matters specifically expressed in the document. You as an agent can accordingly use the POA freely when carrying out the affairs of a physically or mentally incapacited person—completing tasks such as:
  1. Executing financial transactions.
  2. Making healthcare choices.
  3. Controlling estate property and assets.
  4. Making inter vivos gifts of money or estate property.
Agents however should not accept this legal commitment lightly, since it comes with a mountain of fiduciary responsibilities of which will require you to always place the principal’s interests ahead of your own when performing—know that even the slightest divergence from your duties could provoke power of attorney abuse claims against you.
Drafting and executing POA instruments is also a confusing process, which is why the power of attorney abuse team at Iowa Probate Litigation have put together this blog to help you better understand the ins-and-outs of POAs and the legal obligations that accompany them.

Power of Attorney Legal Responsibilities in Iowa

Prior statues in Iowa treated agents as fiduciaries, but they never focused on the scope of the agents’ fiduciary duties.
To address this, and to tackle power of attorney abuse issues more efficiently, the state legislature adopted the Uniform Power of Attorney Act (UPAA) in 2014 by merging UPAA rules into Iowa Code Chapter 633B of which sets forth three unwaivable MANDATORY fiduciary duties that agents must accept when assuming POA roles:
  1. Act in line with the principal’s reasonable expectations and in his/her best interests.
  2. Perform duties in good faith.
  3. Never exceed the authority granted in the POA document.
A principal cannot modify any of the above standards. They can however eliminate or revise the following DEFAULT POA legal duties found in 633B.114 if they do so explicitly within the POA document:
  1. Act loyally for the principal’s benefit.
  2. Avoid conflicts of interests that impair acting impartially in the principal’s best interest.
  3. Perform POA tasks with care, competence and diligence and act as other agents would act under similar circumstances.
  4. Preserve the principal’s estate plan to the extent known and in line with the principal’s best interests
Failure to recognize and follow any of the above agent duties often ignites power of attorney abuse litigation—legal action that holds you personally liable for damages to the estate you vowed to protect.

Four Common Estate Planning Power of Attorney Instruments

Not all power of attorney documents are the same. Each legal instrument holds a specific purpose and can begin or end as the principal sees fit.
  1. Non-Durable (General) Power of Attorney. The agent stands in for the principal to perform almost any legally binding act, including making his/her financial and medical decisions—non-durable POAs take effect immediately, are revocable, and terminate when the principal becomes incapacitated or passes away.
  2. Limited Power of Attorney. POA language that limits the agent’s scope of authority to performing only a specific task restricted to a certain operation (i.e. buying real estate, selling assets).
  3. Springing Durable Power of Attorney. Agent authority that “springs into action” only after a specific event occurs (i.e. incapacitation).
  4. Durable Power of Attorney. The same as a general POA but includes a durable clause that allows the agent to continue to perform when the principal becomes incapacitated.

Agent Authority

The agent’s authority will depend on the type of power of attorney the principal drafts and the language expressed in the document. By default, the courts will presume the principal executed a general instrument when the POA’s terms do not restrain the agent’s power.
Limited financial and medical POAs are the two most sought out documents when planning estates. Such instruments grant agents the authority to make health care decisions for principal and control his/her assets and property in case of incapacity.
The principal may likewise execute multiple power of attorney documents.
For example: one POA instrument may grant the agent exclusive authority to buy and sell real property while a separate POA would only allow him/her to manage the principal’s home care needs.
Regardless of which power of attorney the agent holds, he/she must follow the language and specific directions found in the document and never exceed his/her authority by performing outside the scope laid down in the written agreement.

Healthcare POAs vs. Financial POAs

A fundamental part of any estate plan is deciding what happens if your health prevents you from making life decisions. Estate planning attorneys recommend that testators only add springing-durable-limited healthcare and medical power of attorney documents to their life-plans that are narrowly tailored to meet specific needs.
The following examples reveal the decision-making powers that agents will hold once such POA authority takes effect:
Healthcare POA
  1. Decide what general medical care the principal receives.
  2. Choose the principal’s nutritional diet.
  3. Decide whether the principal requires a caretaker and which personal care tasks the healthcare worker will perform.
  4. Work with the financial agent (if separate) to fulfill the principal’s urgent care, mental health treatment or home care needs.
  5. Choose the doctors the principal sees.
  6. Determine which healthcare facility the principal may reside (i.e. assisted living facility, nursing home).
Financial POA
  1. Open financial accounts in the principal’s name.
  2. File and settle the principal’s taxes.
  3. Pay bills and home care housing expenses with funds from an existing account.
  4. Collect debts or rent for the principal.
  5. Make investment decisions on the principal’s behalf.
  6. Manage the principal’s health and life insurance policies.
  7. Buy and sell personal and real property.
What Agents Can’t Do
Non-durable medical and financial powers of attorney convey broad authority to agents for acting on the principal’s behalf (not recommended). However, even when agents hold a non-durable POA, their power is not limitless—there are activities that agents cannot perform:
  1. May not breach the mandatory fiduciary duties established in Iowa Code 633B.114.
  2. Cannot draft or modify the principal’s will.
  3. May not change the language found in the POA document or assign his/her authority to someone else.
  4. Cannot act on the principal’s behalf after he/she passes away.

Termination of an Agent’s Duties

The courts can dismiss agents from their position when another party brings fiduciary removal proceedings or when the court finds power of attorney abuse has taken place. An agent can also freely resign unless the written agreement states specifically what an agent must do before leaving his/her fiduciary post. Every POA authority however terminates by operation of law when the principal passes away or revokes the document.

Conclusion

Power of attorney instruments are useful estate planning tools but can become risky when the principal places the document into the hands of the wrong person. If you are thinking about adding a POA into your life-plan, follow the expert advice of power of attorney abuse lawyers across Iowa—choose your agent well and never allow him/her to hold unlimited authority to control your life or your estate.

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