|August 18, 2014|
Previously published on August 8, 2014
A power of attorney (POA) is the "express authority, given by a principal to an agent or attorney, allowing them to perform an action on the behalf of the principal." A general POA can be issued to any agent or attorney, allowing them to act as they see fit, while a special or limited POA only allows for certain actions and situations. Understanding the difference can be critical, when dealing with someone who purports to hold a valid POA.
A POA, whether general or limited, requires two parties: the principal and the agent. Ohio's version of the Uniform Power of Attorney Act (UPOAA), effective March 22, 2012, changed the law governing POAs. Ohio defines the "agent" as a person granted authority to act for a principal under a power of attorney, whether denominated an agent, attorney in fact, or otherwise. "Agent" includes an original agent, co-agent, successor agent, and a person to which an agent's authority is delegated; while "principal" is defined as "an individual who grants authority to an agent in a power of attorney."
Furthermore, in Ohio a POA must be signed by the principal or in the principal's conscious presence by another individual directed by the principal to sign the principal's name on the power of attorney. A signature on a power of attorney is presumed to be genuine if the principal acknowledges the signature before a notary public or other individual authorized by law to take acknowledgments.
Most people intend for a POA agent to handle their day-to-day affairs, but not to make changes to their estate plan. Recognizing this, UPOAA prohibits agents from performing certain acts unless the POA specifically authorizes them. Because many POA documents give significant, far-reaching powers to another person, they should be granted only after careful consideration, and relied upon only after reviewing the POA document.
In Ohio , absent wording to the contrary, a POA shall do all of the following:
- Act in accordance with the principal's reasonable expectations to the extent actually known by the agent and, otherwise, in the principal's best interest;
- Act in good faith;
- Act only within the scope of authority granted in the power of attorney;
- Attempt to preserve the principal's estate plan to the extent actually known by the agent if preserving the plan is consistent with the principal's best interest based on all relevant factors, including all of the following: (a) The value and nature of the principal's property; (b) The principal's foreseeable obligations and need for maintenance; (c) Minimization of taxes, including income, estate, inheritance, generation-skipping transfer, and gift taxes; (d) Eligibility for a benefit, a program, or assistance under a statute or regulation.
Additionally, an Ohio POA, absent terms contrary, shall do all of the following:
- Act loyally for the principal's benefit;
- Act so as not to create a conflict of interest that impairs the agent's ability to act impartially in the principal's best interest;
- Act with the care, competence, and diligence ordinarily exercised by agents in similar circumstances;
- Keep a record of all receipts, disbursements, and transactions made on behalf of the principal;
- Cooperate with a person that has authority to make health-care decisions for the principal to carry out the principal's reasonable expectations to the extent actually known by the agent and, otherwise, act in the principal's best interest.
The principal determines the scope of the agent’s authority. However, Ohio law now says that unless the powers are specifically granted, an agent cannot do the following:
- Create a trust for the principal or make changes to an existing trust;
- Give away the principal's property;
- Create or change rights of survivorship;
- Change beneficiary designations; or
- Let others act in place of the named agent; or
- Waive the principal's right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan.
Such powers are the types most likely to be abused. Because some of these powers can potentially be abused, it is critical prior to acquiescing to the acts of a POA to "trust but verify", meaning obtain a copy of the POA first.
Because a POA can be limited to one specific act or power, or a few, rather than general, it is also critical that the POA document be produced prior to relying on representations of authority.
When in doubt that certain powers exist, or when suspect that certain powers are being abused, especially in cases where the principal is elderly, Ohio law now recognizes a number of individuals who may file a motion asking the probate court to review the agent’s actions. However, if the principal asks the court to dismiss such a motion, then the court must dismiss it, unless the court finds that the principal is incapacitated.
Also note that a POA can be and often is revocable. A principal can always change or revoke (cancel) his or her POA. It is recommended this be done in writing, with a copy filed with the County Recorder, and perhaps provided to known financial institutions of the principal. Simply destroying the original document is not enough.
2 O.R.C. 1337
3 O.R.C. 1337.22
4 O.R.C. 1337.25
5 O.R.C. 1337.34