Washington’s new Power of Attorney Act deserves special attention

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By Beau Ruff

Beau Ruff, Cornerstone Wealth Strategies
Beau Ruff,
Cornerstone Wealth Strategies

Estate planning attorneys often remind their clients that laws change frequently and estate plans should be updated periodically to take into account not just changed family circumstances, but also new laws. And, sometimes a new law has such broad implication for estate planning that it is deserves special attention. Such is the case with Washington’s new Power of Attorney Act. The power of attorney is a powerful and ubiquitous piece to your estate plan. A completely new Power of Attorney Act took effect Jan. 1.

As a reminder, a power of attorney, or POA, is a document that allows a person, or principal, to give an agent power to transact the principal’s affairs as if the agent were the principal. Arguably, the POA is the most important piece of your estate plan as it directly affects what happens to you while you are still alive.

The POA Act was introduced in Washington state in the 1970s and had little updating until the robust revisions took effect at the first of the year.

It is important to note that although the new act applies to all POAs (including those executed before Jan. 1, 2017), POAs executed before the first of the year are exempt from both: (1) the new formal execution requirements (discussed below); and (2) the interpretation of the authority granted (discussed below). It is for those reasons that most POAs will not need to be updated. But, some practitioners believe the new POA Act provides a more streamlined process for acceptance of a POA drafted under the new law and for that reason many people may want to consider updating the POA, especially if it has been a while since the plan has been dusted off.

The new POA Act deviates from the previous act in several important areas.

In this column, I explain those area and discuss how they might affect you. Please understand this is a summary review. Every case is unique and you should consult your attorney for specific information.

  1. New formalities for execution. Previously, a POA did not need to be witnessed or notarized. The new law will require either the POA be witnessed or notarized. Most law offices in the area have the internal practice of notarizing POAs anyway, so this is not likely to affect the documents received from attorney’s offices. Plus, as mentioned before, the new law does apply to your old POA, but not with regard to how it was executed (so your old POA need not have been executed with the formalities required by the new law).
  2. New termination provisions. The law was updated to provide that a POA will terminate upon: (1) the filing of dissolution of marriage or a domestic partnership; or (2) the court appointment of a guardian, conservator or fiduciary. This is slightly different from the old law. With regard to divorce, the old law terminated the POA only upon a final decree of dissolution. Practically speaking, anyone going through a divorce should have a new POA drafted.
  1. New coagent default provisions. Co-agents (two agents who are appointed at the same time to exercise the same power) must exercise their authority jointly unless the document specifies that each agent has independent authority.
  2. New broad powers when generally granted. The new law allows the principal to give a general grant of power (e.g. over real property) with a simple and short sentence because specific key words grant lengthy statutory powers. Here again, the old POA will be subject to the old POA laws. Because of this change, new POAs might be much shorter than those previously drafted.
  3. Agents may be exonerated from liability. The new law allows the principal to exonerate an agent from liability for his or her actions — with limitations. This is not likely to require a change to the old POA unless the principal wants to add language to exonerate the agent —perhaps when parents fear the risk that a child appointed risks undue and unfounded legal action from another heir, like a sibling. If you plan to appoint a family member as the agent, it is worthwhile to consider the exoneration to prevent later litigation. If you are going to appoint a professional, you’d likely want to skip the exoneration.
  4. Agents’ liability for delegation to third parties lessened. An agent who engages a third party (like an attorney or CPA) is not liable for the acts of the professional.

Overall, the new act streamlines the drafting, use and acceptance of the power of attorney. But, it also presents a substantial change to the laws that can affect your estate plan. Talk to your estate planning professional to see how it might affect you.

About Beau Ruff

Attorney Beau Ruff works for Cornerstone Wealth Strategies, a full-service independent investment management and financial planning firm in Kennewick, where he focuses on assisting clients with comprehensive planning.