An essential component of a complete estate plan
Durable powers of attorney are an essential component of a complete estate plan. These documents allow you to dictate the person who has the authority (the “agent”) to make important financial and health care decisions for you (the “principal”) if you become incapacitated and cannot make such decisions for yourself. Durable powers of attorney also allow you to specify who should be nominated as your guardian, should a guardian become necessary, as well as the guardian of any minor children.
Uniform Power of Attorney Act
Washington recently enacted the Uniform Power of Attorney Act (Chapter 11.125 Revised Code of Washington), effective January 1, 2017, which has replaced the previous law regarding powers of attorney. However, powers of attorney validly executed under the prior law are still effective. The new law is much more comprehensive and specific than the prior Washington law.
Key Changes
The law provides a more complete listing of the powers held by an agent, and greater protections to prevent abuse of a vulnerable principal by an unscrupulous agent. It also provides clear procedures for executing, certifying, and challenging powers of attorney, along with guidance on other procedural issues that were either unaddressed or vaguely addressed by the previous statute.
One key change is a restriction on the ability of an agent to make gifts on behalf of the principal. Under both current and prior law, an agent has the power to make gifts on the principal’s behalf only if the power of attorney document specifically grants the agent such power. If the power of attorney allows the agent to make gifts on the principal’s behalf, the new law limits such gifts to the federal gift tax annual exclusion (currently $15,000 per donee per year), unless specifically stated otherwise in the power of attorney document. In other words, if a principal wants the agent to be able to make large gifts, the power of attorney document must expressly grant this authority. Many prior powers of attorney do not address this issue. If you have or may have a taxable estate and wish to allow your agent to make large gifts, our office can assist you in determining whether you should sign a new power of attorney.
If you are not concerned with the restriction on an agent’s power to make gifts, a power of attorney executed prior to January 1, 2017 will in many cases remain sufficient. However, it is always a good idea to review your powers of attorney periodically, including after a significant change in your family circumstances or the circumstances of your beneficiaries or appointed agents, such as birth, death, or divorce. Additionally, third parties such as financial institutions may be less likely to challenge a more recent power of attorney than an older power of attorney.
If any of the above circumstances apply to you, or if you have any other concerns regarding your current powers of attorney or other estate planning documents, please contact us, and we would be happy to review your documents and suggest updates where necessary.