Kentucky Power of Attorney Update 2020
In July 2020, a new revision to Kentucky’s Uniform Power of Attorney Act took effect. This was the second big change in the last two years. In 2018, Kentucky adopted parts of the Uniform Power of Attorney Act. The newest revisions adopted some additional portions of the UPOA. The newly updated law is codified in Kentucky Revised Statutes Chapter 390 (KRS 390.010 et seq.).
First, let’s get a few terms defined. A power of attorney is a legal document where a person (called the principal) names another person (called the agent or attorney-in-fact) the authority to do certain acts on his or her behalf. Power of attorney (or POA) is the document. The person signing the document is the principal. The person appointed is the agent (or attorney-in-fact).
What are the big changes you should know about?
1. Witnesses
First, the law changes the requirement for how these documents are signed. The 2018 rule required two disinterested witness to watch the principal sign and then sign the document themselves. The law is back to requiring only a notary to witness the principals signature and then sign. However, many states still require two witnesses. If the principal may have business out-of-state or winters in another state, two witnesses would be advisable.
2. Gifting
Next, the new law gives specific rules regarding the agent’s ability to make gifts on behalf of the principal. If you want your agent to be able to make gifts, this must be specifically stated. If there is no reference to the ability to make gifts, gifts cannot be made.
If the document gives the agent the general right to make gifts without further instructions, gifts are limited to the annual gift tax exclusion ($15,000 for 2020). The gifts may be made to any “person”, but the agent should consider the principal’s history of gift making and other factors.
If you have specific people to whom you want your agent to make gifts, you should specify that in your document. Additionally, for individuals looking to use gifting as a way to minimize assets and plan for Medicaid, the $15,000 restriction is insufficient.
3. Express General Powers
The new law requires that authority to do certain acts must be “expressly authorized.” This means that unless your power of attorney document outlines certain things, your agent cannot do them. The new law also outlines some default powers that certain phrases create. Below are several highlighted powers. This list is not inclusive of all items in the new statue.
A. BANKING.
A general power regarding banking or financial institutions, will allow your agent to open, continue, modify, or close accounts; withdraw funds from the account, including check writing; borrow money and sign promissory notes; and apply for credit or debit cards for the you as well as use them.
B. MAINTENANCE.
A general power for personal and family maintenance allows your agent to do certain things to benefit your spouse, children or others you have “customarily” supported. This includes a wide range of actions including paying for housing, education, child care, and even vacations. Importantly, the current law says that this power is not restricted by the gifting provisions.
C. RETIREMENT.
Giving your agent general authority regarding your retirement plans allows the agent to select the form and timing of payments; to withdraw benefits; make rollovers, establish a and make contributions to a retirement plan; as well as borrow from or sell assets from a retirement plan. Any ability to make changes to beneficiaries should be specifically stated.
D. OTHER.
The act also defines actions that may be taken regarding taxes, real estate, insurance, annuities, and stocks and bonds.
Why Should This Matter to You?
The new act applies to all powers of attorney executed before or after the new law took effect. So even if your power of attorney was signed before July 2020, it is subject to these new rules.
While in some circumstances, it is great that these powers have been defined in such a specific way, it is problematic in that many individuals will not understand what they are signing.
What Should You Do?
Review your power of attorney to see what it actually says. If it uses some of the general phrases listed above, you may want to contact a qualified estate planning or elder law attorney to review the document.
If you have a simple one-page power of attorney that authorizes your agent to act “in my name and stead in any instance”, you need to have your document updated. You should contact a qualified attorney to do so.