By Cary A. Lind

Conclusions and Observations.

The case reviews in the prior two articles are not exhaustive, but the cases illustrate the issues that are reaching the appellate courts. The cases lead to a number of conclusions and observations.

PRACTICAL ISSUES: 1. Taking into consideration the prior articles, which form - statutory or non-statutory - should an attorney use? As is often the case, the answer is, "It depends."

The statutory form has clear advantages. It must be accepted and relied upon by third parties. However, the enumerated powers are limited in ways that are not always obvious. It may be necessary to add additional specific powers to accomplish particular purposes. For example, if the power is to be used to close a real estate deal, you should add a separate "catchall" provision authorizing all of the actions relating to the deal. If the power is intended to initiate and carry on litigation, describe the action to be prosecuted and grant all powers necessary to carry out that litigation. If the power is to establish and fund a living trust, specify the power to do so and all of the critical terms of the proposed trust. Going beyond the statutory powers without specifying additional powers may someday subject the agent to a suit by a disgruntled beneficiary and may subject the drafting attorney to liability for malpractice.

A non-statutory form has different advantages. The powers are not so limited. Hoopingarner is a prime example where the court upheld actions taken pursuant to a non-statutory form that would be invalid had the power been statutory. In the years since the Power of Attorney Act was passed, I have seen a number of non-statutory forms prepared by large Chicago law firms. Electing to use a non-statutory form avoids the statutory limitations and also avoids having to comply with any changes to the statutory form or its required formalities. However, a non-statutory form may have to be separately approved by the legal departments of third parties, such as banks, brokerage firms, etc., because it is not in statutory form.

2. §2-7.5 of the Act sets forth certain required record-keeping by an agent when the principal is incapacitated. However, every agent should be cautioned to keep detailed records of all financial transactions, since the burden of proof will be on the agent to substantiate any expenditure made or action taken under the agency.

3. The agent should also be advised to keep detailed records of time and expenses, including driving mileage. The Act gives the agent under a property power of attorney the right to reasonable fees for so acting, and an agent is entitled to reimbursement of actual expenses incurred. The agent may later choose to waive fees but should still keep the records in case he or she later decides to seek compensation.

4. Finally, the agent should be warned to beware of any gifts made by the principal to the agent or transactions which benefit the agent. With regard to all such transactions, the agent should be warned to get the directions in writing, to have the transfers witnessed by third parties who can later testify, or to take other actions to clearly document the principal's intent to benefit the agent. The agent should assume that anyone who is disadvantaged will later sue to undo any questionable actions. Without the principal available to testify to his or her intent, the transfers will likely be reversed.

©2004 by Cary A. Lind, all rights reserved.

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