We tend to think of the word “attorney” as a synonym for “lawyer.” And, for the most part, that’s usually the case. Technically speaking, though, an “attorney” is an individual empowered to act on behalf of someone else, and it doesn’t always have to refer to a lawyer. An “attorney in fact,” for instance, is appointed under a legal document known as a “power of attorney” and doesn’t need to be a lawyer at all. Today’s article focuses on the important things to know about a Florida power of attorney. Many of the issues discussed may apply in other states; however, it is important to understand that powers of attorney are very state specific with rules that vary based upon state laws.
What is a Power of Attorney?
A power of attorney, or “POA,” is a formally executed document authorizing an “attorney in fact” (or, more commonly, an “agent”) to take certain actions – often but not always relating to legal and financial matters – on behalf of the person signing the document (the “principal”). A POA can delegate wide authority over a broad range of areas. Or it can be very specific – limited to only a few activities and a narrow scope.
Limited POAs are commonly used to facilitate financial transactions, such as the transfer of a vehicle or real estate. A more broadly written POA might empower the agent to handle a variety of financial matters – paying bills, entering into contracts, or buying and selling most property for the principal. A specialized type of POA called a “designation of health care surrogate” (a/k/a “medical POA”) allows the agent to make healthcare decisions in the event of the principal’s incapacity. In Florida, medical POAs are authorized under a different statute (Fla. State. §765.101, et. seq.) than legal and financial POAs, which are authorized by the Florida POA Act, Fla. Stat. §709.2101, et. seq. This article deals primarily with the latter, but for more information on medical POAs see our article on Living Wills and Other Advance Directives in Florida.
General Types of Powers of Attorney
A “general power of attorney” grants the agent broad authority over legal and financial matters. In Florida, the document must identify each and every action the agent is authorized to take. A general delegation to act with regard to “all matters” is not valid. However, Florida law does allow a POA to incorporate all “banking transactions” and “investment transactions” enumerated within the POA Act by simply including the appropriate wording referencing the statute.
A “limited power of attorney” is restricted in time and/or scope or only applicable to a specific transaction. You might use a limited POA to empower an agent to handle a real estate deal or to pay your bills for you for a limited time while you’re out of the country. Where a general POA continues in force until it is intentionally revoked or an automatic revocation event occurs (e.g., the death of the principal or agent), a limited POA typically terminates upon the expiration of its term or the completion of the assigned duty.
By default, a POA ceases if the principal becomes incapacitated. However, the document can include precise language allowing it to survive the principal’s incapacity, in which case it is a “durable power of attorney.” The “magic words” to make a Florida POA durable are, “This durable power of attorney in Florida is not terminated by subsequent incapacity of the principal except as provided in Chapter 709, Florida Statutes.” If all necessary powers are included, a durable POA can avoid the need for guardianship proceedings.
The other side of the coin is a “springing POA,” which does not become effective until a future date or the happening of a specified event – most commonly, the principal’s incapacity. Importantly, Florida law no longer recognizes springing POAs, unless executed prior to October 1, 2011. In Florida, a valid POA takes effect upon execution, and a POA that operates otherwise is invalid. So, if you want a POA ready to go in case you become incapacitated, but you don’t want the agent to act on your behalf unless and until that occurs, you will need to withhold delivery of the document to the agent until you are ready for it to be used. Commonly, a principal will leave an executed POA with his or her attorney, along with directions to deliver the document to the designated agent upon the occurrence of a specific event – such as certification of the principal’s incapacity.
Requirements and Standards for Florida Powers of Attorney
To execute a valid POA, a principal must be mentally competent at the time of signing and capable of understanding the document’s implications and potential effects on his or her property. Along with the principal’s signature, a POA must be signed by two witnesses and acknowledged before a notary public. If the principal is mentally competent but physically incapable of signing, the notary may sign for the principal. Once a POA has been validly executed, copies have the same effect as the original document, except that originals are necessary for certain land transactions.
An agent must be a natural person at least 18 years of age or a financial institution with trust powers and a physical location in Florida. Appointing an agent under power of attorney is a serious matter and should not be taken lightly. An agent should be someone the principal trusts fully and knows is responsible and competent to handle the delegated powers. A potential agent with doubts as to whether he or she can perform the duties capably should decline the appointment and suggest that the principal select someone else.
Under Florida’s POA Act, an agent owes a “fiduciary duty” to the principal. This means the agent must act prudently, loyally, and in good faith, in accordance with the principal’s expectations and best interests. If the agent is aware of the principal’s estate plan, the agent must attempt to preserve the plan unless doing so would be inconsistent with the principal’s best interests. Misuse of an agent’s authority – including by acting outside the scope of a POA – can potentially lead to civil or even criminal liability, but an agent who acts in good faith within his or her authority is not liable for a reduction in the principal’s assets.
Agents cannot delegate authority granted under a POA, but can hire professionals like lawyers or accountants on their principal’s behalf, if the hiring is within the authority granted. Whenever buying or selling property or otherwise acting on a principal’s behalf, an agent has a duty to keep detailed records and receipts.
Limitations on Florida Powers of Attorney
Unlike the authority granted to most trustees in Florida, an agent’s authority under a POA automatically terminates upon the death of the principal. At that point, any actions on behalf of the deceased principal’s estate must be taken by an executor or personal representative appointed by a will or probate court. Other than a durable POA, POA authority likewise ceases if either principal or agent become incapacitated. Under Florida law, a POA between two spouses is invalidated upon filing of a petition for divorce, unless the POA survives divorce by its express terms.
The Florida POA Act describes certain actions which an agent may not take on a principal’s behalf – even if the POA purports to grant the authority. An agent cannot sign an affidavit for the principal asserting that the principal has knowledge of any facts; cannot vote on the principal’s behalf; cannot execute or amend a will; and cannot act as trustee of a trust that names the principal as trustee.
Consistent with the fiduciary duty, an agent cannot use a POA to grant an interest in the principal’s property to the agent him or herself, or to anyone the agent supports, unless the principal and agent are closely related. An agent also cannot take any actions that would amount to the “practice of law,” unless the agent is a licensed lawyer.
Potential Problems with Powers of Attorney
As with most legal documents, there are some potential problems when executing a Florida power of attorney. With that in mind, it’s a good idea to consult an estate planning attorney with experience in Florida’s POA laws before appointing an agent or accepting an appointment. While there are forms available online, they do not always include all necessary elements and are sometimes technically deficient. Of course, even with an attorney’s assistance and a perfect POA, there are a few hitches that might arise.
Improper Execution: To be valid, a POA must precisely meet all statutory requirements. Any defect potentially renders the document ineffective. All powers the principal wants the agent to exercise must be “specifically granted” – delegating the “authority to do all acts relating to my affairs” won’t cut it. And certain specific powers – like the power to create an inter vivos trust, make gifts exceeding the annual federal exclusion, make beneficiary designations, or waive the principal’s right to be a beneficiary – must include the principal’s signature or initials next to the section in which the authority is granted.
Along the same lines, when using a POA, the agent should leave no doubt as to whether the agent is acting individually or on the principal’s behalf. A signature should clearly state that the agent is signing “as attorney in fact for” or “as agent for” the principal.
Insufficient Scope: When creating a POA, you’ll want to tailor the document according to the precise tasks the agent needs to perform. For example, if you want your agent to communicate on your behalf with the Social Security Administration or IRS, but the POA only delegates authority over banking and investment transactions, the document will be inadequate. An experienced attorney can often help to identify useful and relevant powers that you might not initially think of.
Foreign Powers of Attorney. Florida law expressly recognizes the validity of POAs executed in other states, even if not compliant with the Florida POA Act, as long as the document complied with the laws of the state in which it was executed at the time of execution. A third party unsure about the validity of an out-of-state POA has the right to request a legal opinion, which the agent must provide or else the third party can refuse the POA.
When used in Florida, foreign POAs are still subject to the limitations of Florida law. For instance, a POA executed in a sister state that purports to authorize the agent to amend the principal’s will cannot be used for that purpose in Florida.
Reluctant Third Persons. Although Florida generally requires acceptance of a valid POA, some third parties are still reluctant, particularly if they are not familiar with the format. If a POA is rejected, the rejecting party must provide a written explanation for the rejection within a “reasonable time,” defined as four business days for banking and investment transactions. Under certain circumstances, such as if the third person believes in good faith that the POA is invalid or no longer effective – or that the proposed action exceeds the agent’s authority – the third person can refuse the POA. Or, if the agent refuses to provide an affidavit of authenticity, an English translation, or an opinion of counsel – or if the third person would not be obligated to engage in the transaction with the principal him or herself – the third person can refuse to accept the POA.
Whether used in Florida estate planning or elder law planning or just for day-to-day convenience, a power of attorney can be a handy – and sometimes indispensable – tool for your financial affairs. To provide its benefits, though, a POA must be carefully crafted to meet both the legal requirements and your specific needs. If you are thinking about executing a power of attorney, a knowledgeable Florida attorney can help ensure you create a document that does everything you need it to do.
Steve Gibbs, Esq.