Financial Power of Attorney

Financial Power of Attorney

The Georgia statute calls this form a Financial Power of Attorney, which differentiates it from the old Health Care Power of Attorney.  As its name suggests, it is a document that allows another person to make financial decisions.  The statutory form has many choices on it as to which powers to grant, and whether to make it durable or non-durable.  It may be advisable to modify this statutory form slightly particularly for elderly clients so that the most common elements do not require separate signatures, as that may be too burdens on for people with disabilities that impair their ability to sign. (1)  However, if such changes are made it is essential to thoroughly review the document with the client.

In a power of attorney the principal authorizes an agent to act on the principal’s behalf.  Powers of attorney may be general, granting broad powers over financial decisions, or may be more limited to specific transactions.  Powers of attorney are particularly helpful documents as they allow for another to make financial decisions for the principal, which can save the time, cost and expense of getting a conservatorship.  This is particularly true of people with large estates, as it may be difficult to get bonded, which is a necessary part of a conservatorship.  However, this lack of oversight is not without risk.  A power of attorney is a powerful document, allowing another to completely take control of the finances of a principal.  Although there are statutory and common law protections with breach of fiduciary duty and embezzlement claims, it may be impossible to recover the assets and money from a dishonorable agent who has wasted everything away.  If there truly is no one that a client can trust, other options than executing a financial power of attorney should be explored.  Possible solutions include professionally managed trusts or simply allowing for a conservatorship to later be sought, in order to ensure court oversight.  Another problem with powers of attorney is that they require the higher contractual standard of capacity, unlike the testamentary capacity of a will. (2)  Furthermore, a person with dementia, paranoia, etc. may revoke their power of attorney, making a conservatorship necessary anyway.

Under O.C.G.A. § 10-6-36 a power of attorney is considered “durable” unless it specifically states otherwise.  A “durable” power of attorney is one that continues to be effective even during a period of incapacity of the principal.  However, the power of attorney is still cancelled upon the death of the principal.  Under O.C.G.A. § 10-6-6 Georgia does allow powers of attorney to be “springing,” becoming effective upon incapacity.  A common misconception amongst clients is that since a springing power of attorney is only effective upon incapacity, that a less responsible or trustworthy person can be elected.  However, since there is no judicial oversight and typically no bond, the opposite is actually true, since an incapacitated person cannot properly defend themselves.

            Pursuant to O.C.G.A. § 10-6-142 a "notarized signature [is] required for [a] power of attorney [that] authoriz[es] real and personal property transactions." (3)

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(1) O.C.G.A. § 10-6-140 (“The Georgia Statutory Form for Financial Power of Attorney set out in Code Section 10-6-142 may be used to create a financial power of attorney, but is not the exclusive method for creating such an agency.”)
(2) SunTrust Bank, Middle Georgia N.A. v. Harper, 250 Ga.App. 300, 306, 551 S.E.2d 419, 425-26 (2001).
(3)  Sambor v. Kelley, 271 Ga. 133, 134, 518 S.E.2d 120, 121 FN6 (1999).

Advance Directive

The “Georgia Advance Directive for Health Care Act” is codified at O.C.G.A. § 31-32-1 et al.  O.C.G.A. § 31-32-2 defines an “Advance directive for health care” as “a written document voluntarily executed by a declarant in accordance with the requirements of Code Section 31-32-5.”  Prior to this advance directive law, Georgia had durable powers of attorney for health care and living wills.[1]  Those prior documents executed before June 30, 2007 are still valid, but it may be advisable to still update them as the current documents are more internally consistent and detailed.[2]

“Any person of sound mind who is emancipated or 18 years of age or older may execute” an advance directive.  The document must be “in writing, signed by the declarant or by some other person in the declarant's presence and at the declarant's express direction, and witnessed . . .”[3]  Declarants are free to use other documents which substantially comply with the code and can also use the documents of another state which was validly executed in accordance with the law of that other state.[4]  This “advance directive for health care shall be attested and subscribed in the presence of the declarant by two witnesses who are of sound mind and at least 18 years of age, but such witnesses do not have to be together or present when the declarant signs the advance directive for health care.”[5]  The witnesses cannot be a person “selected to serve as the declarant's health care agent” or who “[w]ill knowingly inherit anything from the declarant or otherwise knowingly gain a financial benefit from the declarant's death” or who “[i]s directly involved in the declarant's health care.”[6]  In addition, “[n]ot more than one of the witnesses may be an employee, agent, or medical staff member of the health care facility in which the declarant is receiving health care.”[7]  As a practice note, many hospitals and other facilities have policies against their employees serving as witnesses or notaries, and therefore it is advisable to bring your own witnesses, as it may not always be possible to find a helpful bystander who will serve as a witness.  It should also be noted that “[a] physician or health care provider who is directly involved in the declarant's health care may not serve as the declarant's health care agent.”[8]  Unlike with last will and testaments, where copies can be more problematic, “A copy of an advance directive for health care executed in accordance with this Code section shall be valid and have the same meaning and effect as the original document.”[9]  Any amendments must be executed with the same requirements as above.

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[1] O.C.G.A. § 31-32-2 (“‘Durable power of attorney for health care’ means a written document voluntarily executed by an individual creating a health care agency in accordance with Chapter 36 of this title, as such chapter existed on and before June 30, 2007.” “‘Living will” means a written document voluntarily executed by an individual directing the withholding or withdrawal of life- sustaining procedures when an individual is in a terminal condition, coma, or persistent vegetative state in accordance with this chapter, as such chapter existed on and before June 30, 2007.”)

[2] O.C.G.A. § 31-32-3. (“Living wills, claims, rights, or remedies executed or accrued prior to July 1, 2007 The provisions of this chapter shall not apply to, affect, or invalidate a living will or durable power of attorney for health care executed prior to July 1, 2007, to which the provisions of former Chapter 32 or Chapter 36 of this title shall continue to apply, nor shall it affect any claim, right, or remedy that accrued prior to July 1, 2007.”)

[3] O.C.G.A. § 31-32-5.

[4] Id.

[5] Id.

[6] Id.

[7] Id.

[8] Id.

[9] Id.

The Importance of Planning When You Have Capacity

In Georgia, incapacity planning takes several forms.  With planning documents, such as Advance Directives and Financial Powers of Attorney, one can designate who can make important life decisions, without the intervention of a court.  The downside to these documents, however, is that they must be executed when a person has sufficient capacity.  Unlike last will and testaments, Advance Directives and Financial Powers of attorney require more than just testamentary capacity to execute, and instead require the higher standard for contracts.  Another problem is that people with dementia may, in their illness, revoke the documents out of suspicion, thereby necessitating the use of a guardian and conservator.  However, even in that situation the documents do help a court determine who the proper person should be to serve as guardian and conservator.  Of course, particularly with Financial Powers of Attorney, it is essential that the agents named be very trustworthy.

            Trusts are probate avoidance devices.  Any property that is put into them becomes a non-probate asset, and thus not subject to probate proceedings.  Trusts may also have provisions to deal with incapacity.  However trusts have no control over assets that are not placed into them, either by deed, bill of sale, transfer of title or testamentary disposition.