POWERS OF ATTORNEY – PART 1 – OVERVIEW
By Cary A. Lind
Powers of attorney have been around for a long time. Effective September 22, 1987, Illinois enacted the Illinois Power of Attorney Act (“the Act”), 755 ILCS 45/1-1f. A number of recent articles have addressed the practical issues in preparing and using powers of attorney. See, e.g., Sharon R. Rudy, Illinois Bar Journal (January, 1996), “Substituted Decision-making for the Elderly: Living Wills, POAs, and Other Options”; and Daniel M. Moore, Jr., Illinois Bar Journal (January, 2003), “Helping Clients Make the Most of Health-Care and Property POAs.” The Act was significantly amended effective as of July 1, 2011. For details, see Mary D. Cascino, Illinois Bar Journal (November, 2010), “Get Ready for the New Illinois Power of Attorney Act.” The main changes were to the statutory forms themselves.
Practical Suggestion: Read the Act, for the first time or again. There are provisions there that are surprising and that can cause a significant malpractice exposure to attorneys who are not aware of them. Some of those provisions will be addressed below, but this review is not meant to be in depth. Also note that even though the legislature provided the “statutory” forms, it also provided that the forms could be modified without affecting their validity.
Article II of the Act sets forth general rules relating to powers of attorney and explicitly allows an agency to continue during the disability of the principal and until the principal’s death. Section 2-4 provides that the Act applies to all powers of attorney, not only the statutory short forms. Thus, some of the law regarding powers of attorney is the same for statutory and non-statutory powers, and some is different. The provisions of Article II of the Act apply to all powers. Section 2-7 imposes record-keeping duties on agents under powers of attorney. Section 2-8 provides protection to a party who relies on a power of attorney that appears to be in proper form. That section reverses a prior court case which held Citibank liable for accepting a fraudulent power of attorney because the power of attorney was found by the Court not to be “authorized.” The 2010 amendment also set out a certification form to be provided upon request to third-party reliants. Section 2-10 (discussed in prior Estate Department articles) addresses the limitations and powers of a Court in dealing with powers of attorney in guardianship proceedings.
Article III sets out the Statutory Short Form Power of Attorney for Property and sets forth the rules regarding the use of the power. The 2010 amendment added a “Notice to Principal” to be initialed by the principal. It also contains a new Notice to Agent advising the agent of his or her duties. Agents are often unaware of what potential traps lie before them and can act inadvertantly and innocently in ways that will cause them personal liability. The new notice portion of the PPOA is meant to prevent such liability. (Also, see Part 4 of this series below.) Most sources recommend adding additional powers to those set forth in the form to allow establishing and funding of living trusts, tax planning, qualifying for Medicaid, and more. If you do not already add provisions to the statutory form, you should consider doing so. If a power is not added today, it may not be possible to add it later. Also, note Section 3-4. That section is required to be attached to all statutory property powers of attorney. It defines the agent’s powers but also contains important limits on an agent’s authority. In particular, the section states that “the agent will not have power under any of the statutory categories (a) through (o) to make gifts of the principal’s property, to exercise powers to appoint to others or to change any beneficiary whom the principal has designated to take the principal’s interests at death under any will, trust, joint tenancy, beneficiary form or contractual arrangement.” The breach of that provision has led to several reported appellate decisions. Section 2-9 (all powers) also requires the agent to take into account and attempt to preserve the principal’s estate plan.
Article IV sets out the Statutory Short Form Power of Attorney for Health Care. The 2010 amendment added a similar notice to the principal. Section 4-1 details the legislative purpose behind the power of attorney for health care and takes a strong stand in favor of allowing every person to decide all aspects of his or her own personal care. The 2010 amendment made significant changes to the medical terminology and actions which can be taken by agents under the HCPOA. Section 4-7 recites the duties of health care professionals in dealing with health care agencies. Section 4-8 offers immunity to health care professionals if they act in good faith in reliance on an agent’s decisions. Section 4-9 provides criminal penalties to any person who tampers with a health care power of attorney, who forges or fabricates a health care agency, or who commits other enumerated acts.
A full review of the 2010 amendment is beyond the scope of this series of articles. The Act should be reviewed in detail regarding any specific questions.
Two general predictions were made when the Power of Attorney Act was enacted. First, it was predicted that the Act would standardize and increase the use of powers of attorney, especially because POA’s allow individuals to avoid guardianships. That prediction came true. Most attorneys now include powers of attorney for property and health care as part of their will, trust, or estate planning packages, and countless guardianships have been avoided by their liberal use.
Second, it was predicted that with increased use of the powers of attorney, there would be increased abuse as well. That has also occurred. There has been a stream of reported Appellate Court cases reflecting the misuse or abuse of powers of attorney. The abuses led in part to amendments to the Statutory Property Power effective June 9, 2000, one provision of which requires a witness to the execution of the Property Power of Attorney in addition to a Notary. In the articles to follow, I will review reported decisions involving powers of attorney to date and the analysis courts have used in deciding them. The review will be limited to powers of attorney for property, since no reported cases to date have addressed any issues regarding health care powers of attorney. Also, these articles all relate to PPOAs prior to the 2010 amendment. Decisions on the amended Act will undoubtedly appear with the passage of time.
©2003 by Cary A. Lind, all rights reserved.