April 4, 2014 By Rahul A. Narayanan
In powers of attorney the PRINCIPAL (the person who executes the document) grants their ATTORNEY(S)-IN-FACT (the person(s) given the power) the legal right to execute financial transactions on behalf of the principal. “Attorney-in-fact” is a term of art. The attorney-in-fact is not necessarily an attorney-at-law and does NOT have to be a lawyer.
There are many different types of powers of attorney designed to serve various purposes. Some of the most useful powers are “statutory powers of attorney”. they are flexible and the scope of the powers they grant is reasonably well understood. Also, their legal status, execution and use are specifically prescribed by state law. Of course, this also means the powers and scope of statutory powers of attorney vary from state to state.
In Minnesota, the power may be limited to financial transactions specifically selected on the document. A broad range of powers can be granted: banking or investments, property transfers, insurance, gifts, claims and litigation, real estate, obtaining records or information and beyond. Thus, statutory powers of attorney can serve many purposes. The power can also have an expiration date, should the principal choose.
The Minnesota Legislature made many changes required for powers of attorney executed after January 1, 2014. The law does NOT invalidate powers of attorney executed before this date under the old requirements. See Minnesota Statutes, §523.23, subd. 6.
First, §523.20 was amended to require that the powers-of—attorney contain “an acknowledgement that the attorney-in-fact has read and understood the notice to the attorney-in-fact required under section 523.23…”. Second, §523.24 makes changes which pertain to the federal annual gift exclusion amount. Third, under §523.14, subd. 14, “The language conferring general authority does not include any powers to make health care decisions for the principal.”
The actual substantive changes to the statutory powers of attorney include a major change in the third section, which states, that, “my attorney(s)-in-fact MAY NOT make gifts to the attorney(s)-in-fact, or anyone the attorney-in-fact is legally obligated to support, UNLESS I have made a check or an “x” on the line in front of the second statement below and I have written in the name(s) of the attorney(s)-in-fact. The second option allows you to limit the gifting power to only the attorney(s)-in-fact you name in the statement. Minnesota Statutes, §523.24, subdivision 8, clause (2), limits the annual gift(s) made to my attorney(s)-in-fact, or to anyone the attorney(s)-in-fact are legally obligated to support, to an amount, in the aggregate, that does not exceed the federal annual gift tax exclusion amount in the year of the gift…”
There are now two additional sections at the end of the document following the signature page that serve as notices to the principal and attorney-in-fact. These sections advise both principal and the attorney(s)-in-fact of their rights under the law, the powers granted, and their obligations under these powers. The principal is required to sign this notice and the attorney(s)-in-fact to initial it. This is to ensure that both Principal and Attorney-in-Fact are informed of their duties.
The changes to the powers of attorney were tailored to inform everyone of his or her rights and responsibilities. The new powers of attorney are more precise about what powers are granted or not granted.
This information and discussion about the changes to the powers of attorney does not constitute or serve as legal advice. If you have any questions about this document, or would like to discuss preparing a statutory power of attorney, please contact an attorney.