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Powers of Attorney: An Overview

Writer's picture: Ryder TiptonRyder Tipton

Powers of Attorney: Overview

On January 1, 2017, the South Carolina Uniform Power of Attorney Act replaced the former provisions relating to powers of attorney within the Code. A Power of Attorney (“POA”) authorizes someone (“Agent”) to handle certain matters on your behalf. You are referred to as the Principal. Generally, we recommend clients have a Durable POA (“DPOA”) and a Health Care POA (“HCPOA”). Most people have heard about a “Living Will” and/or a “Declaration of a Desire for a Natural Death”. These documents have largely been incorporated into the statutorily created HCPOA.

 

The HCPOA can be a useful tool, particularly when you are unable to communicate your desires for certain medical treatment options. Under the general document produced by the legislature you nominate your agent or agents to make healthcare decisions on your behalf. There are specific questions related to organ donation, life sustaining treatment, and tube feeding throughout which requires you to choose among alternatives.

 

The DPOA is the document about which more clients tend to have questions, comments, concerns, and ideas about ways to address specific issues such as choosing multiple Agents. This document is the one people generally think of when dealing with financial institutions or having someone do business on behalf of the Principal.  DPOAs can be general or limited to specific types of transactions.

 

Most clients think about needing this document in the case of incapacity. As mentioned above, individuals who accept appointment are known as “Agents”[1]. Agents owe certain fiduciary duties to the Principal[2]. The Agent shall act “in accordance with the principal’s reasonable expectations to the extent known by the agent and in the principal’s best interest, in good faith, and only within the scope of authority granted.” It is important to remember that the agent cannot do something the principal could not have done. The term durable means that the POA “survives incapacity”, but not the death of the Principal. Under the Act, the default rule provides for automatic durability unless the DPOA explicitly provides otherwise. ** In South Carolina, all DPOAs must be recorded in order for the Agent to be able to act for an incapacitated individual. Most attorneys and financial institutions relying on a DPOA will want to see that it has been recorded in order to better protect themselves.

 

Some clients prefer the DPOA to go into effect immediately and others want the DPOA to be a “springing” DPOA meaning that upon the occurrence of a future event or contingency the nominated Agent can then begin acting[3]. Springing DPOAs can cause issues with proving the contingency has occurred and allowing banks and others to effectively rely on the DPOA. Often the contingency is a requirement that the Principal be examined by one or more medical personnel to determine capacity. In addition to the time that might require, there is the additional problem of convincing the party being asked to accept the DPOA to do so with documentation from the medical personnel which could be easily forged. While this might seem to be a reasonable safeguard for the Principal, in practice, it will likely make the DPOA totally ineffective, if for no other reason than the delay that must occur in obtaining the medical opinion(s) and convincing the recipient to agree that the springing event has occurred and/or that the medical personnel documentation is valid.

 

There are a number of statutory provisions which authorize the Agent to act on behalf of the Principal. For instance, if there is language in the DPOA granting general authority to the Agent with respect to banks and other financial institutions the Agent has the power to modify and terminate accounts, withdraw funds, borrow funds, etc. Some powers granted to the Agent must be specifically stated in the DPOA to be effective. For example, the power to access a safe deposit box or the power to make gifts require specific grants of authority in the DPOA. General language regarding these powers is not sufficient to authorize these actions.

 

A common scenario we see is parents naming one or more children as co-owners of bank accounts (e.g., creating multiple-party accounts) to allow the children to transact business on behalf of the living parent. This is a scenario that can have drastic consequences which we will discuss in an upcoming blog post. One solution would be for the parent to execute a valid DPOA to name the child or children as Agent(s) who would have authority to transact business using bank accounts.[4] Be aware that some financial institutions will not willingly accept a DPOA that names multiple Agents. This may be partly due to the fact that those DPOAs could require all Agents to act together or could authorize any Agent to act alone. Whenever the institution must analyze a document, particularly a DPOA, you can expect that the institution will want to “send it to our legal department for review.”


[1] S.C. Code 62-8-102(1)

[2] S.C. Code 62-8-102 (9) and 62-8-114

[3] S.C. Code 62-8-109

[4] S.C. Code 62-8-111

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