New Power-of-Attorney Rules in Nebraska Present Pros and Cons for Bankers
The Nebraska Uniform Power of Attorney Act (the “Act”) took effect on January 1, 2013, providing more detailed guidance for those attorneys-in-fact named on a durable power of attorney (defined as “agents” in the Act). The Act also provides safeguards to third parties working with agents, as well as imposing duties. The Act contains many provisions that are beneficial to banks, while other aspects impose additional requirements. The good news, and the bad, is described below.
The Good News
- Third Party Reliance of Power of Attorney. The Act generally provides greater protection for third parties dealing with agents, such as financial institutions. Generally, a third party that in good faith accepts a power of attorney that has been notarized, with no actual knowledge that the power of attorney is void, can rely on the power of attorney. The Act states that a third party that receives an agent’s certification can rely on the certification as to factual matters, and third parties are also afforded protections for employees who had no actual knowledge of a fact that would make a transaction void.
Financial institutions may want to begin obtaining certifications from those opening POA accounts and performing financial transactions as agent. In addition, financial institutions will want to ensure that powers of attorney executed in Nebraska after January 1, 2013 are notarized.
- General Powers. In the Act, “general powers” are triggered by one person granting an agent authority to do “all acts that a principal could do.” General powers do not need to be specifically described in the power of attorney. Rather, the statute provides a litany of items that are to be included on the list of “general powers.” In the banking context, the Act lists a comprehensive list of general powers relating to financial matters, which should give financial institutions more comfort that the agent has authority to perform financial acts.
- Specific Powers. The Act states that certain powers cannot be exercised by an agent unless they are specifically listed in the durable power of attorney. These include the authority to:
- Create, amend, revoke, or terminate an inter vivos trust;
- Make a gift;
- Create or change rights of survivorship;
- Create or change a beneficiary designation;
- Delegate authority granted under the power of attorney;
- Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan;
- Exercise fiduciary powers that the principal has authority to delegate; or
- Renounce or disclaim property, including a power of appointment.
Financial institutions should be aware of these limitations if the financial institution may be called upon to facilitate their exercise.
- Authority of Co-Agents. Unlike prior law, co-agents are now by default allowed to act independently. This should simplify the monitoring of power of attorney accounts that name co-agents.
The Bad News
The Act also makes a number of changes that may pose challenges to financial institutions, a few of which are summarized below:
- Liability for Refusal to Accept Power of Attorney. The Act requires a financial institution to accept a notarized power of attorney no later than seven (7) business days after it is presented, except in limited circumstances. Failure to timely accept a power of attorney can result in court action and the payment of attorney’s fees to the agent.
- New Execution Requirements. The Act now requires that a durable power of attorney be notarized to be effective. Former law contained no such requirement, so confusion may arise about whether a power of attorney is validly executed depending on its execution date.
- No Automatic Revocation of Prior Power of Attorney. The Act does not provide for automatic revocation of an earlier executed power of attorney. Accordingly, a certification should be used to state that no prior power of attorney existed or, in the alternative, that the prior power of attorney was explicitly revoked.
Practical Considerations
We would recommend that financial institutions review their procedures for acceptance of durable powers of attorney to ensure continued compliance under the Act. Financial institutions should also review procedures to determine if it can take advantage of additional safeguards under the Act.