The New Powerful Power of Attorney Law

By Olivia S. Benson, Esq.,

and

Adam Friedman, St. Thomas University School of Law J.D. 2012

Florida’s Power of Attorney law saw sweeping change in October of 2011.  In the first installment of this two-part article, we will summarize the general applicability of powers of attorney.  In the following installment we will address the recent statutory changes.

A power of attorney grants one party (an agent) the ability to act on behalf of another party (the principal).[13]  This authority typically exists in one of two forms; a principal may grant an agent a conventional (or nondurable) power of attorney, or a durable power of attorney.  In order to create a durable power of attorney, the principal must expressly do so in the granting document, otherwise a nondurable power of attorney is created by default.  There is only one significant difference between a conventional power of attorney and a durable power of attorney.  While a conventional power of attorney is terminated by the principal’s incapacity, a durable power of attorney survives such adjudication.[14]  This distinction naturally raises the question, “What is incapacity?”  Florida Statutes define “incapacity” as anyinability by a person to adequately obtain, administer, or dispose of property.[15]  The term “incapacity” is broadly defined and not limited to mental incompetence.  Since surviving incapacity is the only relevant distinction between the durable and conventional power of attorney, the remainder of this article will refer to both forms synonymously.

The creation and execution of a power of attorney has explicit requirements.  Specifically, the granting document must be signed by the principal, by two (2) subscribing witnesses, and acknowledged before a notary public.[16]  However, these requirements are more relaxed than the requirements for creating a will.  Whereas will formalities require the witnesses to simultaneously sign in the presence of each otherand the testator, a power of attorney has no such requirement.[17]

While there is only one (1) commonly used method to create a power of attorney; there are several ways in which a power of attorney and/or an agent’s authority can be terminated.  Among the more common ways in which a power of attorney may terminate are: 1) if the principal dies; 2) if the principal revokes the power of attorney; 3) if the express purpose of the power of attorney has been accomplished; and 4) if the power of attorney provides that it terminates.[18]  The first basis for termination, death of the principal, is commonly misunderstood.  Frequently, upon the death of a principal, the agent attempts to make a bank transaction (or similar act) on the principal’s behalf and is denied.  The reason being—a power of attorney does not survive the principal’s death.

         A power of attorney creates a fiduciary relationship between principal and agent, and thus is governed by common law agency rules.[19]  As such, the agent’s duties to the principal include, but are not limited to: 1) acting consistent with the principal’s expectations; 2) acting in good faith; and 3) acting with the principal’s best interests in mind.[20]

An agent is defined as “a person with the authority to act for a principal[.]”[21]  This authority allows the agent to act in the place of the principal; therefore, with limited exception, the law treats an act performed by the agent as an act performed by the principal.[22]  As a result, if the agent makes a questionable business decision or a negligent disposition of property and in doing so opens the principal up to liability, the principal is fully responsible.  However, the fiduciary relationship inherent in a power of attorney creates a potential for liability on more than one front.  For instance, if the agent is in breach of his fiduciary duty, he may be liable to the principal for damages as well as for costs and fees associated with defending an adverse claim.[23] 

Due to the fact that an agent’s job may open him up to liability, it is only fair that agents are adequately compensated.  All agents, unless expressly prohibited by the power of attorney, have a right to be reimbursed for any expenses that they may incur within the scope of their duty.[24]  Additionally, if an agent is deemed a “qualified agent,” then they are entitled to reasonable compensation for the work performed within the scope of their duty.[25]  A qualified agent is one who is either 1) the spouse of the principal, 2) an heir of the principal, 3) a financial institution with trust powers and a place of business in Florida, 4) a Florida attorney or certified public accountant, or 5) a resident of Florida who has never been an agent for more than three (3) principals at the same time.[26]

It is a common misconception that a power of attorney is limited to the elderly and infirm.  In fact, a principal is defined as, “an individual who grants authority to an agent in a power of attorney.”[27]  In reality, principals can be anyone.  For instance, an owner of a company (the principal) who will be away from the daily operation of their organization for an extended period of time may require another person (the agent) to act in their place during this absence.  A second misconception associated with a power of attorney is the belief that an agent’s power to act in the place of the principal is extremely broad.  In fact, a power of attorney can be as extensive or as limited as the principal desires.  The extent of the agent’s authority depends upon the principal’s goals and intent, making a power of attorney useful to many people. For example, a power of attorney may grant an agent authority over the principal’s entire real and personal property wherever located, and whenever acquired, or it can merely authorize an agent to sign a single document in the principal’s stead.[28]  A power of attorney is not only applicable to many individuals, but can be tailored as great or as slight as a principal desires.

         In 2011, major reforms of Florida’s power of attorney laws occurred, and will be the focus of our second installment.