GEORGIA’S NEW STATUTORY POWER OF ATTORNEY BECOMES LAW JULY 1, 2017: WHAT YOU NEED TO KNOW

By: John Cleveland Hill, Esq. and Sarah Randal Watchko, Esq.

The General Assembly of Georgia passed and Governor Nathan Deal has signed a new law substantially overhauling financial Powers of Attorney (“POAs”), and the statute is effective July 1, 2017.  This article will give a brief overview of the law and its impacts, but the article is not comprehensive and should not be taken as such.  Individuals should seek the advice of their own legal counsel on this topic.

What is a POA and why is it important?

Let’s start with the basic concept.  A POA is a written document wherein one person (commonly called the “principal”) gives power to another person (commonly called the “agent” or the “attorney in fact”) to “step into the shoes” of the principal regarding the principal’s financial and asset management and decision making.

A POA is especially helpful—if not vitally important—should you reach a point in life where handling your own affairs is difficult or completely impossible. This could be due to an accident or sudden illness. Think of those daily, monthly, and yearly tasks required to make your financial life run smoothly.  If you could no longer care for those things yourself, someone needs to be able to do so for you.  Traditionally, we use a POA for those tasks.  In the absence of a POA, those that care about you will have little choice but to file an action in your local probate court to have someone appointed as “conservator”—what Georgia law calls a financial guardian.  The conservatorship process can be costly, lengthy, and requires ongoing court supervision for the duration of your incapacity.  Obviously the court supervised conservatorships provide an important role when someone does not have trustworthy people in their lives to serve as an agent under POA; for most, however, a POA will be a better choice.  Having a POA executed is intended to thwart the need for a conservatorship.

What does the new law do differently? Protections and Ability to Enforce.

In recent years agents attempting to use POAs for the principal have been met with increasing resistance from certain third parties— in the author’s experience, this resistance has largely come from banks and other financial institutions.  Banks and financial institutions have become so risk/liability averse that they have simply refused to follow the instructions of an agent under POA.  The result is that clients who thought that they had completed thorough, thoughtful estate planning were left in sometimes dire circumstances and their agents were left unable to access or use their finances for the principal’s benefit.

Under pre-July 1, 2017 law, third parties could not be forced to accept the POA because, under theories of contract law, the third party was not a party to the contract—the POA was only between the principal and agent.  Under the old law, there was very little, if any, recourse if a third party, such as a bank, refused to accept a POA.

The new statute provides significant protections for the third parties by providing that any person/entity may rely upon the validity of the POA unless that person has actual knowledge that the POA has been is invalid or has been terminated.

More importantly for our purposes here, however, the law creates the ability to force a third party to accept the POA if certain conditions are met.  Here is what is required to force acceptance of the POA:

  • The POA must be the statutory form or a document that “substantially reflects the language in the statutory form.
  • The agent must present the POA to the third party and seek to use the POA with the third party (i.e., agent presents POA to principal’s bank and asks to be given access to the principal’s bank accounts).
  • If the third party refuses to accept the POA, the third party has up to seven (7) business days to request either a certification from the agent, an English translation (if such is necessary), or an attorney’s opinion. If the third party requests any of these items, the agent must supply them to the third party.
    • Certification of Agent is a notarized statement, under penalty of perjury, concerning the principal, agent, and the POA.
    • Attorney’s Opinion is an explanation from an attorney regarding the POA.
  • After the agent supplies the requested documentation, the third party has up to five (5) business days to accept the POA.
  • Third parties may still refuse to accept the POA under certain circumstances: action requested is not required of the third party; action is against federal law; third party has actual knowledge that the POA or agent’s authority has terminated; where agent’s certification, English translation or attorney’s opinion have not been provided; good faith believe that the POA is invalid or agent lacks authority; or where the third makes or knows that another party has made a report to adult protective services concerning abuse of the principal.

If the third party refuses to accept the POA after compliance with the requirements of law by the agent and the third party does not have a valid, statutory reason for its rejection, then a court can be asked to rule on the validity of the POA and issue an order forcing the third party to accept the POA.   The third party can also be forced to reimburse the principal for reasonable attorney’s fees and expenses in pursuing the enforcement.  The court also has the ability to hold the third party liable for additional damages and other remedies.

This is an immense shift in Georgia law with regard to agents being able to care for their principals, and generally speaking, in families being able to care of each other during times of incapacitation.

What should you or your loved ones do now?

Although the new statute does not invalidate pre-July 1, 2017 POAs, the old law will still apply to the old POAs—in other words, there will be little or no ability to force acceptance of the POA.  Individuals should strongly consider contacting their estate planning attorney to determine whether updating to the new statutory POA is advisable for them.

Copyright 2017; Hill & Watchko, LLC.

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Videotaping your will signing may not produce the desired outcome

Some people make video recordings of their will signings in an effort to create evidence that they possess the requisite testamentary capacity. For some, this strategy may help stave off a will contest. But in most cases, the risk that the recording will provide ammunition to someone who wishes to challenge the will outweighs the potential benefits.

Assessing the downsides

Unless the person signing the will delivers a flawless, natural performance, a challenger will pounce on the slightest hesitation, apparent discomfort or momentary confusion as “proof” that the person lacked testamentary capacity. Even the sharpest among us occasionally forgets facts or mixes up our children’s or grandchildren’s names. And discomfort or nervousness with the recording process can easily be mistaken for confusion or duress.

You’re probably thinking, “Why can’t we just re-record portions of the video that don’t look good?” The problem with this approach is that a challenger’s attorney will likely ask how much editing was done and how many “takes” were used in the video and cite that as further evidence of lack of testamentary capacity.

Video recording of the signing should be carefully considered with your estate planning attorney so that all possible downsides can be assessed and thoroughly discussed.

Implementing alternative strategies

For most people, other strategies for avoiding a will contest are preferable to recording the will signing. These include having a medical practitioner examine you and attest to your capacity immediately before the signing. It can also involve choosing reliable witnesses (including the drafting attorney and his or her staff), including a “no contest clause” in your will, and using a funded revocable trust, which avoids probate and, therefore, is more difficult and expensive to challenge.  In Georgia, there are other techniques that can be used based upon estate planning doctrines that can make a challenge significantly more difficult using the so-called “doctrine of dependent relative revocation,” which should be considered when there exists a significant risk of challenge to the estate plan due to family dynamics.

If you’d like more information on estate planning strategies, please contact us.

© 2017

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Worried about challenges to your estate plan? Make it “no-contest”!

Estate planning is all about protecting your family and ensuring that your wealth is distributed according to your wishes. So the idea that someone might challenge your estate plan can be disconcerting. One strategy for protecting your plan is to include a “no-contest” clause in your will or revocable trust (or both).

Our firm, Hill & Watchko, uses these clauses as a matter of regular practice.  Unless the client expressly directs us to remove the no-contest clause, it will appear in our Wills and Revocable Living Trusts.  We firmly believe in the right of our clients to leave their property to whomever they choose and in the proportions that they want.  The no-contest clause can help carry this out.

What’s a no-contest clause?

A no-contest clause essentially disinherits anyone who contests your will or trust (typically on grounds of undue influence or lack of testamentary capacity) and loses. It’s meant to serve as a deterrent against frivolous challenges that would create unnecessary expense and delay for your family.

Most, but not all, states permit and enforce no-contest clauses. And even if they’re allowed, the laws differ — often in subtle ways — from state to state, so it’s important to consult state law before including a no-contest clause in your will or trust.  Georgia law allows for such provisions.

Some jurisdictions have different rules regarding which types of proceedings constitute a “contest.” For example, in some states your heirs may be able to challenge the appointment of an executor or trustee without violating a no-contest clause. And in some states, courts will refuse to enforce the clause if a challenger has “probable cause” or some other defensible reason for bringing the challenge. This is true even if the challenge itself is unsuccessful.

Are there alternative strategies?

A no-contest clause can be a powerful deterrent, but it’s also important, wherever you live, to design your estate plan in a way that minimizes incentives to challenge it. To avoid claims of undue influence or lack of testamentary capacity, have a qualified physician or psychiatrist examine you — at or near the time you sign your will or trust — and attest in writing to your mental competence. Also choose witnesses whom your heirs trust and whom you expect to be able and willing to testify, if necessary, to your freedom from undue influence. Finally, record the execution of your will.

Of course, you should also make an effort to treat your children and other family members fairly, remembering that “equal” isn’t necessarily fair, depending on the circumstances.

The provisions do not work if you exclude someone from the Will or Trust

The no-contest provisions are helpful and should be very strongly considered for inclusion in your estate plan, but those provisions are only enforceable against someone who is named in the document to receive an asset.  If you were to simply exclude a person expressly in the document, there is no incentive for that person not to file a challenge to the document in court.  They have already been cut out so they have “nothing to lose” by lawyering-up and trying to blow up the estate plan.

What to do?

One method is to give a cash bequest to the person you seek to otherwise exclude, thereby making him or her subject to the no-contest provision. The cash bequest would need to be significant enough to make him or her seriously consider whether hiring a lawyer and incurring litigation costs and chancing losing the bequest is worth it.

Protect yourself

As you develop or update your estate plan, it’s important to think about ways to protect yourself against challenges by disgruntled heirs or beneficiaries. We can help you determine if a no-contest clause can be an effective tool for discouraging such challenges.

 

 

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