A power of attorney gives someone you trust the power to sign financial documents for you. If you lose the ability to make financial decisions or you are away on vacation or business, your agent can act for you.
We find many of our clients have powers of attorney but they are old. Now, more than ever before, it is time to update your power of attorney. Here are 5 reasons to do so.
Connecticut Changed its Power of Attorney Law
Effective October 1, 2016, Connecticut has a new power of attorney law. See Connecticut Public Acts 15-240 and 16-40. Most current Connecticut powers of attorney are based on a statute passed in the 1960s. That is before retirement plans existed, before home computers existed and even before electronic banking! The new law clearly defines all of the powers necessary to undertake modern financial transactions.
Your Agent May No Longer Be Appropriate
Lives do not stay the same. Whether from a divorce, a move to another state or country, death, change in availability, or decline in friendship, your relationship with your agent may not be the same as it was when you named him or her as your agent in your power of attorney. You may now have other people who are closer to you and have good sense who would make better agents for helping you with financial transactions.
A Financial Institution May Not Accept Your Power of Attorney
Some banks do not accept old powers of attorney. They become stale. Any power of attorney more than 3 years old is subject to rejection. With the new Connecticut law, financial institutions have a duty to accept powers of attorney unless the financial institution suspects fraud. However, it is unclear whether financial institutions will require the use of the new form of Connecticut power of attorney to accept the power of attorney.
Notice to Your Agent of Their Duties
The old Connecticut law gave no guidance to agents. The new law clearly outlines the agent’s duties. Those duties include keeping good records, avoiding conflicts of interest, working with your health care agent, following your estate plan, and following your wishes to the extent known.
Clarify Whether You Want the Agent to Be Able to Make Gifts or Change Beneficiary Designations
The new Connecticut power of attorney law requires the signor to affirmatively elect by initialing whether the agent can make gifts, change beneficiary designations, or amend a trust. These “hot powers” will create an opportunity for you to define what you want your agent to be able to do. The ability to make gifts could prove useful for saving estate taxes or qualifying for Title 19 Medicaid. Giving the agent the power to change beneficiaries could help reduce income taxes on retirement assets. The agent could abuse these powers, though, so they are not for every family situation.
With the passage of the new law, there has never been a more important time for Connecticut residents to review and revise their powers of attorney. Give us a call to talk to our knowledgeable estate planning attorneys about updating your power of attorney.
