Thursday, October 21, 2021

September 2021 OBA Legal Briefs

2021 OK legislation – Part II

  • Oklahoma Power of Attorney Act – Part 1

By Pauli D. Loeffler

Note: I am grateful to my extern Kelsey Hull for her assistance with this article. Kelsey is in her final year of law school at Oklahoma City University College of Law. You can look forward to an OBA Legal Briefs article authored by Kelsey later this fall. – PDL

The Oklahoma Uniform Power of Attorney Act (the “POA Act”), is found in Title 58 O.S. §§ 3001 – 3045 and is effective November 1, 2021. It was promulgated by the Uniform Laws Commission (“the ULC”) in 2006 and has been adopted by 29 states, with pending legislation for adoption in Massachusetts and the District of Columbia. The Code Comments by the ULC for the POA Act recommend that states adopting the POA Act that have enacted the Uniform Durable Power of Attorney Act and/or the Statutory Form of Power of Attorney Act should repeal the statutes under those acts. The enactment of the POA Act, did repeal (“the DPOA Act”) found in Title 58 effective November 1, 2021. The DPOA Act was promulgated by the ULC in 1979, enacted in Oklahoma in 1988, and adopted by a total of 21 states. The Oklahoma Uniform Statutory Form of Power of Attorney Act (“the Statutory Act”), was promulgated by the ULC in 1988 and enacted in Oklahoma effective November 1, 1998. Only 11 states enacted the Statutory Act. You can find the Statutory Act in Title 15 O.S. §§ 1001 – 1020. None of the sections of the Statutory Act were repealed.

A page with links to all the Uniform Power of Attorney Act sections has been added to the OBA’s Legal Links page under the Miscellaneous section in Templates, Forms, and Charts. In order to access the Legal Links and all the OBA Legal Briefs articles from January 2005 forward, you will need to register an account using your individual bank email address, and call Janis or Nancy at the OBA.

Before we bite into the meat of the POA Act, let’s look at § 3045 – Application of this Act on Power of Attorney Created Before, On, or After November 1, 2021

Except as otherwise provided in this act, on the effective date of this act:

  1. This act applies to a power of attorney created before, on or after the effective date of this act;
  2. This act applies to a judicial proceeding concerning a power of attorney commenced on or after the effective date of this act;
  3. This act applies to a judicial proceeding concerning a power of attorney commenced before the effective date of this act unless the court finds that application of a provision of this act would substantially interfere with the effective conduct of the judicial proceeding or prejudice the rights of a party, in which case that provision does not apply and the superseded law applies; and
  4. A power of attorney created before the effective date of this act is not affected by this act.

Let’s start with some of the definitions in the POA Act so we are all on the same page with regard to terms.

§ 3002

  1. “Agent” means a person granted authority to act for a principal under a power of attorney, whether denominated an agent, attorney-in-fact or otherwise. The term includes an original agent, coagent, successor agent and a person to which an agent’s authority is delegated
  2. “Power of attorney” means a writing or other record that grants authority to an agent to act in the place of the principal, whether or not the term power of attorney is used…
  3. “Principal” means an individual who grants authority to an agent in a power of attorney…

In this article, I will be using the acronym “AIF” instead of the POA Act’s preferred term “agent.” My typing speed and accuracy is at best average, and AIF takes fewer keystrokes.

The POA Act was introduced in two prior Oklahoma legislative sessions. To the best of my recollection, this occurred in the period between 2007 and 2010, but neither time did the bills pass. The POA Act basically requires that anyone presented with a properly executed POA accept the POA in most situations or face possible liability for refusal. This is true whether the POA is executed before, on, or after November 1st.

Let’s start with the nuts and bolts.

§ 3005 provides:

A power of attorney must be signed by the principal or in the principal’s conscious presence by another individual directed by the principal to sign the principal’s name on the power of attorney. A signature on a power of attorney is presumed to be genuine if the principal acknowledges the signature before a notary public or other individual authorized by law to take acknowledgments.

This section covers the situation where the principal has had a stroke and is no longer capable of producing a signature that matches other documents the bank has such as the signature card. It also applies when the principal can only sign by mark provided the principal is capable of understanding the nature of the POA. The principal can direct that another person to write his name on his behalf.

Two sections of the POA Act hold special importance: § 3006, Valid Execution and Copies and § 3007:

  1. A power of attorney executed in this state on or after the effective date of this act is valid if its execution complies with Section 5 of this act.
  2. A power of attorney executed in this state before the effective date of this act is valid if its execution complied with the law of this state as it existed at the time of execution.
  3. A power of attorney executed other than in this state is valid in this state if, when the power of attorney was executed, the execution complied with:
  4. The law of the jurisdiction that determines the meaning and effect of the power of attorney pursuant to Section 7 of this act; [§ 3007: The meaning and effect of a power of attorney is determined by the law of the jurisdiction indicated in the power of attorney and, in the absence of an indication of jurisdiction, by the law of the jurisdiction in which the power of attorney was executed.] or
  5. The requirements for a military power of attorney pursuant to 10 U.S.C., Section 1044b, as amended.
  6. Except as otherwise provided by statute other than this act, a photocopy or electronically transmitted copy of an original power of attorney has the same effect as the original.

Bankers often ask: Are witnesses to the execution of a POA required? The POA Act has no requirement for witnesses to the execution of a POA period, but what about a DPOA/POA executed prior to the effective date of the POA Act. The answer is “no,” Under the POA Act, DPOA, there is included a provision for two witnesses, unrelated to either the principal or the AIF, but that section also states:

A durable power of attorney may be executed in accordance with the following provisions; provided, however, failure to execute a power of attorney as prescribed in this section shall not be construed to diminish the effect or validity of an otherwise properly executed durable power of attorney…

This means that even though § 1072.2 had lines for two witnesses, if there aren’t any witnesses, the POA is still valid. Basically, witnesses are merely optional. This is further bolstered under the Statutory Act Form set out in § 1003 of Title 15 which has no provisions for witnesses at all but allows the principal to choose whether the POA is durable or not.

  • § 3006 and § 3007 address a question I get a lot is with regard to POAs executed in another state or the POA states that the law of a state other than Oklahoma will apply. I am licensed to practice law only in Oklahoma, and I cannot opine to the laws of other states. This forces me to advise the bank to consult an attorney licensed to practice in the state where the POA is executed or the state whose law will govern the POA. This is an expense banks rarely wants to incur. Under the § 3020, the bank can require an attorney’s opinion within 7 days of receipt of the POA AND the principal is required to pay for it. If the bank fails to timely make the request, the bank is stuck with paying for the legal opinion. In other words, the bank needs to provide for such requests in its policy and have a procedure in place to timely make the request.

I know a of a few banks that by bank policy require the principal to execute the bank’s standard POA form in order to allow the AIF to make transactions, obtain information, etc., and will not accept an existing POA or DPOA regardless of whether the POA or DPOA is executed in Oklahoma or actually states that the document is subject to Oklahoma law. This practice has always bothered me, particularly when the principal is merely out of town or is ill, since the whole point of executing a POA or DPOA is to allow the AIF to act under such circumstances. While such policy provides uniformity and saves the bank from the bother of actually reading the POA, it thwarts the principal’s intent in providing the POA. A bank refusing to accept a POA based on such policy will result in liability under the POA Act.

Let’s look at §§ 3019 and 3020.

§ 3019 – Good Faith Acceptance and Acknowledgement of Power of Attorney; English Translation or Opinion of Counsel

  1. For purposes of this section and Section 20 of this act, “acknowledged” means purportedly verified before a notary public or other individual authorized to take acknowledgements.
  2. A person that in good faith accepts an acknowledged power of attorney without actual knowledge that the signature is not genuine may rely upon the presumption under Section 5 of this act that the signature is genuine.
  3. A person that in good faith accepts an acknowledged power of attorney without actual knowledge that the power of attorney is void, invalid or terminated, that the purported agent’s authority is void, invalid or terminated, or that the agent is exceeding or improperly exercising the agent’s authority may rely upon the power of attorney as if the power of attorney were genuine, valid and still in effect, the agent’s authority were genuine, valid and still in effect, and the agent had not exceeded and had properly exercised the authority.
  4. A person that is asked to accept an acknowledged power of attorney may request, and rely upon, without further investigation:
  5. An agent’s certification under penalty of perjury of any factual matter concerning the principal, agent or power of attorney; [Template Form is § 3042]
  6. An English translation of the power of attorney if the power of attorney contains, in whole or in part, language other than English; and
  7. An opinion of counsel as to any matter of law concerning the power of attorney if the person making the request provides in a writing or other record the reason for the request.
  8. An English translation or an opinion of counsel requested under this section must be provided at the principal’s expense unless the request is made more than seven (7) business days after the power of attorney is presented for acceptance.
  9. For purposes of this section and Section 20 of this act, a person that conducts activities through employees is without actual knowledge of a fact relating to a power of attorney, a principal or an agent if the employee conducting the transaction involving the power of attorney is without actual knowledge of the fact.

If the POA is executed in accordance with § 3005, the bank is protected under § 3019 in accepting the document unless it has actual knowledge that: 1) the signature of the principal is forged, 2) the principal has died, 3) the POA is not durable, and a court has appointed a guardian,  4) the bank has received a revocation of the POA by the principal, 5) the POA is a “springing” POA (becomes effective only on the occurrence of an event such as incapacity or other event, and the event has not occurred), or 6) the AIF is required to act jointly with a co-AIF or otherwise does not have authority to act under the POA. Occasionally, a POA for health care is provided to the bank. Such a POA does not have any provisions with regard to banking powers. In such cases, there is no liability for refusing acceptance.

While the bank can no longer have a policy of requiring its own POA form to be used, the bank may certainly require that the AIF provide the Certification Form under § 3042. Note that the form is optional, and the bank may require additional information to be included. I will note that § 1076 of the DPOA Act provides for an Affidavit executed by the AIF with regard to Lack of Actual Knowledge of Termination or Revocation of Power of Attorney. That Affidavit protects the bank in accepting a POA or DPOA. A template for the Affidavit is available on the Legal Links page and may be used for DPOAs/POAs executed prior to the effective date of the POA Act.

§ 3020 – Acceptance of an Acknowledged Power of Attorney; Requests for a Certification, a Translation, or an Opinion of Counsel; When a Person Is Not Required to Accept an Acknowledged Power of Attorney; Refusal to Accept an Acknowledged Power of Attorney in Violation of this Act

  1. Except as otherwise provided in subsection B of this section:
  2. A person shall either accept an acknowledged power of attorney or request a certification, a translation or an opinion of counsel under subsection D of Section 19 of this act no later than seven (7) business days after presentation of the power of attorney for acceptance;
  3. If a person requests a certification, a translation or an opinion of counsel under subsection D of Section 19 of this act, the person shall accept the power of attorney no later than five (5) business days after receipt of the certification, translation or opinion of counsel; and
  4. A person may not require an additional or different form of power of attorney for authority granted in the power of attorney presented.
  5. A person is not required to accept an acknowledged power of attorney if:
  6. The person is not otherwise required to engage in a transaction with the principal in the same circumstances; [For example, the principal does not pass ChexSystems, the principal has a charge-off, there is a temporary restraining order against the principal coming within 100 feet on a bank employee, etc.].
  7. Engaging in a transaction with the agent or the principal in the same circumstances would be inconsistent with federal law;
  8. The person has actual knowledge of the termination of the agent’s authority or of the power of attorney before exercise of the power;
  9. A request for a certification, a translation or an opinion of counsel under subsection D of Section 19 of this act is refused;
  10. The person in good faith believes that the power is not valid or that the agent does not have the authority to perform the act requested, whether or not a certification, a translation or an opinion of counsel under subsection D of Section 19 of this act has been requested or provided; or
  11. The person makes, or has actual knowledge that another person has made, a report to the Adult Protective Services office stating a good-faith belief that the principal may be subject to physical or financial abuse, neglect, exploitation or abandonment by the agent or a person acting for or with the agent.
  12. A person that refuses in violation of this section to accept an acknowledged power of attorney is subject to:
  13. A court order mandating acceptance of the power of attorney; and
  14. Liability for reasonable attorney fees and costs incurred in any action or proceeding that confirms the validity of the power of attorney or mandates acceptance of the power of attorney.

Some provisions of the POA Act that make changes to existing laws.

Agents, co-agents, and successors

§ 3011

  1. A principal may designate two or more persons to act as coagents. Unless the power of attorney otherwise provides, each coagent may exercise its authority independently.
  2. A principal may designate one or more successor agents to act if an agent resigns, dies, becomes incapacitated, is not qualified to serve or declines to serve. A principal may grant authority to designate one or more successor agents to an agent or other person designated by name, office or function. Unless the power of attorney otherwise provides, a successor agent:
  3. Has the same authority as that granted to the original agent; and
  4. May not act until all predecessor agents have resigned, died, become incapacitated, are no longer qualified to serve or have declined to serve.
  5. Except as otherwise provided in the power of attorney and subsection D of this section, an agent that does not participate in or conceal a breach of fiduciary duty committed by another agent, including a predecessor agent, is not liable for the actions of the other agent.
  6. An agent that has actual knowledge of a breach or imminent breach of fiduciary duty by another agent shall notify the principal and, if the principal is incapacitated, take any action reasonably appropriate in the circumstances to safeguard the principal’s best interest. An agent that fails to notify the principal or take action as required by this subsection is liable for the reasonably foreseeable damages that could have been avoided if the agent had notified the principal or taken such action.

The only change under § 3011 from current law is that if more than one agent is named and the POA does not state that they may act independently, we have to look to see if there is an “and,” “and/or,” or an “or” between the names of the AIF. If there is an “and” between the names the assumption is that the AIFs must act together. If there is an “and/or” or an “or” between the names, the assumption is that the AIFs may act independently. Note that this will still be the case for POAs executed before November 1st.

Durability under the POA Act.

§ 3004 provides that unless the POA expressly provides that it is terminated by the incapacity of the principal, a POA executed on or after November 1, 2021, is a durable POA by default. This is exactly the opposite of how we currently review a POA for durability which is by looking for language substantially similar to that set out under § 1004 of the Statutory POA Act, i.e., “This power of attorney will continue to be effective if I become disabled, incapacitated, or incompetent.” In other words, you will have to review DPOAs for the required language if executed before the effective date.

§ 3009 provides that POAs are immediately effective unless the POA specifically provides otherwise. These POAs are known as Springing POAs or Springing DPOAs because the powers granted the AIF only “spring to life” (become effective) upon the occurrence of an event stated in the document. The event may be incapacity of the principal, when the principal is in a hospital or rehabilitation, or the principal is outside the state or the country.

§ 3009 – When Power of Attorney Becomes Effective

  1. A power of attorney is effective when executed unless the principal provides in the power of attorney that it becomes effective at a future date or upon the occurrence of a future event or contingency.
  2. If a power of attorney becomes effective upon the occurrence of a future event or contingency, the principal, in the power of attorney, may authorize one or more persons to determine in a writing or other record that the event or contingency has occurred.
  3. If a power of attorney becomes effective upon the principal’s incapacity and the principal has not authorized a person to determine whether the principal is incapacitated, or the person authorized is unable or unwilling to make the determination, the power of attorney becomes effective upon a determination in a writing or other record by:
  4. A physician or licensed psychologist that the principal is incapacitated within the meaning of subparagraph a of paragraph 5 of Section 2 of this act; or
  5. An attorney at law, a judge or an appropriate governmental official that the principal is incapacitated within the meaning of subparagraph b of paragraph 5 of Section 2 of this act. [See, Determination of Incapacity, below]
  6. A person authorized by the principal in the power of attorney to determine that the principal is incapacitated may act as the principal’s personal representative pursuant to the Health Insurance Portability and Accountability Act, Sections 1171 through 1179 of the Social Security Act, 42 U.S.C., Section 1320d, as amended, and applicable regulations, to obtain access to the principal’s health care information and communicate with the principal’s health care provider.

Determination of incapacity.

§ 3002

  1. “Incapacity” means inability of an individual to manage property or business affairs because the individual:

a. has an impairment in the ability to receive and evaluate information or make or communicate decisions even with the use of technological assistance, or

b. is:

(1) missing,

(2) detained, including incarcerated in a penal system, or

(3) outside the United States and unable to return…

More often than not, a DPOA fails to provide what constitutes incapacity such as one or more letters from physicians or permits the AIF to make the determination. At present, the only way to avoid having to CIP the principal or prevent his access to the account in such situation is if there is a guardian appointed by a court of competent jurisdiction. I believe this continues to be the case if the DPOA is executed before November 1.

POAs executed on or after the effective date of the POA Act: It is possible to use these two sections when the AIF has banking powers under the POA Act without the need to wait for a guardianship order when the POA is silent as to what constitutes incapacity/incompetency.

Under the CIP FAQs, if the principal is competent, the bank must CIP the principal, but if the principal is incompetent, then the bank must CIP the AIF instead. if the principal is missing, detained/incarcerated, or outside the U.S. and unable to return (think travel restrictions due to Covid-19), the bank would not need to CIP the principal until s/he is no longer missing, is released from incarceration, or returns to the United States.

Form Templates. I am a fan of the Statutory Act Form Template found in § 1003 as well as what powers are authorized under the individual categories (e.g.,  § 1010 – Construction of Power Relating to Banking and Other Financial Institution Transactions). The POA Act is similar in that it also notes what powers are authorized under the individual categories (e.g., § 3031 Agent’s Authority – Banks and Other Financial Institutions).  In fact, § 1010 and § 1031 are nearly identical.

§ 1010 provides:

In a statutory power of attorney, the language granting power with respect to banking and other financial institution transactions empowers the agent to:

    1. Continue, modify, and terminate an account or other banking arrangement made by or on behalf of the principal;
    2. Establish, modify, and terminate an account or other banking arrangement with a bank, trust company, savings and loan association, credit union, thrift company, brokerage firm, or other financial institution selected by the agent…

§ 3031 Agent’s Authority – Banks and Other Financial Institutions provides:

Unless the power of attorney otherwise provides, language in a power of attorney granting general authority with respect to banks and other financial institutions authorizes the agent to:

    1. Continue, modify and terminate an account or other banking arrangement made by or on behalf of the principal;
    2. Establish, modify and terminate an account or other banking arrangement with a bank, trust company, savings and loan association, credit union, thrift company, brokerage firm or other financial institution selected by the agent;

A recurring question asked by bankers is whether the AIF can add, change, or remove a beneficiary since the Statutory Act utilizes the word “modify.” My position is that the term “modify” does NOT include the power to add, change, or remove a beneficiary chosen by the principal nor to add a joint owner without specific language providing such power.  The reason I prefer the Form Template in § 3041  over the one in the Statutory Act is that it recognizes that certain actions require special authorization in order to allow the AIF to act. I won’t have to argue this point with attorneys any more. 

The form also alerts the principal of the possible consequences of providing authorization for such specific actions:

My agent MAY NOT do any of the following specific acts for me UNLESS I have INITIALED the specific authority listed below:

(CAUTION: Granting any of the following will give your agent the authority to take actions that could significantly reduce your property or change how your property is distributed at your death. INITIAL ONLY the specific authority you WANT to give your agent.)

(___) Create, amend, revoke or terminate an inter vivos trust

(___) Make a gift, subject to the limitations of the Uniform Power of Attorney Act, Section 3040 of Title 58 of the Oklahoma Statutes and any special instructions in this power of attorney

(___) Create or change rights of survivorship [PODs, adding joint owner]

(___) Create or change a beneficiary designation

(___) Authorize another person to exercise the authority granted under this power of attorney [add an authorized signer to an account]

(___) Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan

(___) Exercise fiduciary powers that the principal has authority to delegate

(___) Access the content of electronic communications

(___) Disclaim or refuse an interest in property, including a power of appointment

LIMITATION ON AGENT’S AUTHORITY

SPECIAL INSTRUCTIONS (OPTIONAL)

You may give special instructions on the following lines:

 The Form Template under the POA Act is satisfactory to allow such actions of the AIF only if the appropriate lines are initialed.

October’s Legal Briefs will contain additional information on the POA Act as well as other legislation taking effect November 1st.