As of July 2020, Kentucky once again implemented new changes to its power of attorney laws. These changes follow the Uniform Power of Attorney Act.
A Power of Attorney (“POA”) is a legal document that names an agent to act in the place of the principal as authorized. The principal is the individual granting power to an agent to act in situations where the principal has become unable.
Of the recent changes, the following are the most noteworthy:
Witness Requirement for Execution
Under KRS 457.050, the principal must now sign in the presence of a notary public to create a valid POA. Under the prior law, a power of attorney could be executed with the principal’s signature in the presence of two disinterested witnesses.
A Statutory Form
Kentucky’s new POA laws include a statutory form to assist an individual, the principal, to specifically authorize certain powers of their agent from a provided list. The use of this form allows for a more streamlined and uniform execution of POAs, but leaves room for confusion as to what exactly is being authorized by checking the box. The specific powers listed within the form are defined by statute. It is critically important that any principal fully understand the breadth of powers delegated to an agent.
Express Grant of Authority v. General Grant of Authority
The new law distinguishes between express grants of authority and general grants of authority within the statutory form. Granting general authority to act is limited by the subsections within the statute, which provide for specific actions that may be taken under a general grant of authority. For example, KRS 457.270 lays out nine ways in which the agent may act under a general grant of authority as to the principal’s real property.
A general grant of authority is accomplished by selecting the power on the statutory form. An express grant of authority requires the agent to specifically state within the POA that the agent has the authority to conduct certain actions. The following actions require an express grant of authority for the agent to act on behalf of the principal:
- Create, amend, revoke, or terminate a trust
- Make a gift
- Alter rights of survivorship
- Alter beneficiary designation
- Delegate authority granted under the power of attorney
- Waive principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan
- Exercise fiduciary powers
- Exercise authority over electronic communications sent or received by the principal.
Under the new changes, the KRS 457.400 also differentiates between a general grant of authority and an express grant of authority as to an agent’s ability to make gifts of the principal’s property. Most importantly, the agent does not have the power to designate a gift without authorization from the POA.
A general grant of authority will allow the agent to gift a certain amount, not to exceed the annual dollar limits of the federal gift tax exclusion under Internal Revenue Code Section 2503(b), 26 U.S.C. sec. 2503(b). Additionally, if the agent is only acting under a general grant of authority and not a spouse, ancestor, or descendant of the principal then the agent may not make gifts to themselves or others that the agent may owe a legal obligation. This limitation may effect the ability of the agent to follow the wishes of the principal.
General grants of authority to make gifts may lead to unintentional limits on the ability of the agent to act as the principal intended. For example, if the principal intends that a non-relative agent be able to designate gifts as they see fit, a general grant of authority will simply not allow the agent to do so. Thus, based on the desires of the principal, the POA needs to expressly grant a specific power to gift certain assets as to allow for the ability to make or amend gifts to certain recipients.
Lastly, agents are required to only make gifts that are consistent with the principal’s known objectives. If the agent is unsure of the principal’s objectives then the agent must only make gifts in the principal’s best interest.
Every situation is different, so if you or a family member have any questions about creating an effective power of attorney that best serves your individual needs or if you have any other estate planning matters, please contact a DBL Law Estate Planning attorney
*DBL Law Clerk Madison Gamble contributed to this article.
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