Since January 1, 2018, North Carolina has observed a new set of rules pertaining to powers of attorney. These new rules are North Carolina’s take on the Uniform Power of Attorney Act, which was also recently adopted by Georgia and South Carolina (with each state putting their own twist on some of the provisions). In addition to adding some consistency to the way powers of attorney are handled throughout our region, the new law clarifies certain points of law and eases some of the concerns that made banks and other financial institutions reluctant to deal with powers of attorney in the past.
What is a Power of Attorney?
Before diving into the finer points of the new law, it may be helpful to review what a power of attorney is. A power of attorney is a document that allows a “principal” to appoint an “agent” to act in the principal’s place. Unless the document says otherwise, the agent’s authority begins as soon as the document is executed. If a principal so desires, a document can instead be written so that an agent’s authority doesn’t spring into existence until a specified event comes to pass (such as the principal losing capacity to make decisions on his or her own behalf). In either case, a principal can put limits on the agent’s authority to act, but in general, the agent can deal with the principal’s real property, tangible personal property, and bank accounts in exactly the same way as the principal could. Subject to any limitations put in place, the agent can even can operate the principal’s business, pursue claims and litigation on the principal’s behalf, sign the principal’s tax returns, and more. With a power of attorney in place, a principal doesn’t have to worry about his or her life grinding to a halt in the event that the principal is not able to deal with his or her assets directly. An agent will be there to keep things on track, and there won’t be any need to first endure a potentially lengthy and expensive guardianship proceeding in court.
Power of Attorney Changes
Some of the biggest changes to the new law affect the relationship between principals and agents, including the manner in which a principal can revoke a power of attorney and an agent’s authority thereunder. Also clarified are the rules regarding co-agents serving together under a power of attorney. As an additional means of protecting principals, the new law states that certain important powers can no longer be given to an agent under a general grant of authority, but must be explicitly granted to the agent. Finally, under the new law, powers of attorney do not need to be recorded with the Register of Deeds in order to be effective (unless the agent needs to carry out a real estate transaction).
Many of the changes affect third parties – people or institutions who may deal with an agent acting under the authority of a power of attorney. Under the new law, it is much clearer when a third party is free to reject a power of attorney and what steps a third party may take to assure itself that a power of attorney is legitimate. Third parties should remember that the power of attorney execution requirements vary from state to state, so it is always wise to look at the document’s state of origin and choice of law provision when evaluating its legitimacy.
Is a Previous Power of Attorney still valid?
It is important to know that a power of attorney executed prior to January 1, 2018 is still valid, even after the change in the law. However, a pre-2018 power of attorney will likely lack some of the protections that are now the norm under newer documents. As time passes, financial institutions and other third parties will become less and less familiar with pre-2018 powers of attorney, and these documents may become harder for agents to use as a result.
If you would like to replace your old power of attorney or execute one for the first time, the estate planning attorneys at Blanco Tackabery are here to help. Please feel free to contact us by phone or email to discuss powers of attorney or any other estate planning needs you may have.
About the Author: Ryan Layton
Ryan is a wills, trusts and estate planning attorney at Blanco Tackabery.