By: Joy A. Trueworthy, Esq.
In a financial power of attorney, one person (the principal) gives another person (the agent) the authority to manage the principal’s property and to make financial decisions for the principal. A financial power of attorney (FPOA) is a very powerful document. An expansive FPOA may give the agent authority that is as broad as or broader than could be granted in a conservatorship order. This can avoid the need for a conservatorship, if the principal ever became incapacitated, although the principal may nominate the agent in the FPOA to serve as conservator in case one is ever needed. Having a FPOA also avoids the need to name a child as a joint owner on a bank account, which subjects the account to the child’s creditors and can disrupt the parent’s estate plan. Also, a FPOA may include expansive powers that allow an agent to protect the principal’s assets if the principal needs to apply for long-term care assistance under the MaineCare program.
Although FPOAs may be drafted in different ways, given all these potential benefits, estate planning and elder law attorneys will generally urge clients to have a FPOA. Until recently, agents’ duties have primarily included responsibilties like acting loyally for the principal’s benefit, keeping records of all transactions done on behalf of the principal, and attempting to preserve the principal’s estate plan. 18-A M.R.S. § 914. When naming an agent, clients often consider the agent’s trustworthiness and logistical ability to serve.
Until now, there has been little to discuss about the effect on the agent of being named as an agent under a FPOA beyond how much time may be involved and confirming that the agent may be reimbursed for the agent’s time and expenses. This is primarily because, under the Uniform Power of Attorney Act, which Maine adopted in 2010, a principal may include a provision in a FPOA that exonerates the agent for breach of the agent’s duties unless the breach was done dishonestly, with an improper motive, or with reckless indifference, or if the provision on exoneration was inserted in the FPOA through an abuse of a confidential or fiduciary relationship with the principal. 18-A M.R.S. § 5-915.
The effect of being named as an agent under a FPOA recently changed due to the passage of “An Act to Further Define Duties for Persons Who Hold Powers of Attorney or Act as Agents for Residents of Long-term Care Facilities.” The general thrust of the Act is to impose greater duties and liabilities upon nursing homes, assisted living facilities, and agents to ensure that facilities are paid for services the principal receives and that the principal promptly applies for MaineCare long-term care financial assistance, if needed. In particular, nursing home and assisted living facility contracts must include that:
- The resident or resident’s agent must make timely payment to the facility from the resident’s resources;
- If the facility believes that the resident of the facility financially qualifies for MaineCare, it must assist the resident or the resident’s agent in completing and filing a MaineCare application;
- The resident or resident’s agent must notify the facility when the resident or resident’s agent has reason to believe the resident financially qualifies for MaineCare and timely file an application or assist the facility in filing an application; and
- If the resident’s agent fails in his or her obligation to fulfil these duties, the facility may file a lawsuit in the Probate Court or state District Court for review of the agent’s performance and request attorney fees and costs from the agent.
In other words, this law imposes upon an agent under an FPOA the requirement to monitor that the facility in which the principal is living is being paid and to either apply for MaineCare long-term care benefits on the principal’s behalf or assist the facility with doing so. P.L. 2015, ch. 247, §§ 1-2, to be codified at 22 M.R.S. § 1826.
Under prior Maine law, agents had no affirmative duty to take any specific actions; there were simply requirements about how agents should act if they did do something on behalf of the principal. While this new requirement may not deter most close relatives from serving as an agent under a FPOA, it may prevent some friends, more distant relatives, or financial professionals from being willing to serve. This new liability may be an additional reason for principals to make their FPOAs “springing,” that is, for the document to be effective only if a judge, group of chosen people, or a doctor says the principal is incapacitated. While there are compelling reasons, on the other hand, to have the document be effective immediately, having it be springing would protect the agent from these duties and liability so long as the principal had the capacity to manage his or her financial affairs.
Three further factors add to the concerns arising from this change. Estate planning documents are confidential, and it is generally the principal’s choice whether to share the FPOA with the agent, or back-up agents, named in the document. It is possible that the agent may not be aware that he or she has been named in this role. Also, this required notice is part of facilities’ contracts with their new resident. If the principal is able to sign the contract with the facility, rather than the agent signing on the principal’s behalf, the agent may not be aware of this additional responsibility and liability. Further, because this change in the law was incorporated into a Maine statute that governs licensing of nursing home and other facilities, rather than the statutes governing powers of attorney generally, even many attorneys may not learn of this change for some time.
Despite this new consideration, it is still critical to have a financial power of attorney—even for married individuals, as there are certain actions that even spouses cannot take on each other’s behalf. If you are a principal who wishes to review your power of attorney in light of this change in the law, or if you are an agent who has questions about your duties and liability, we are available to assist you with sorting through these issues.