NEW KENTUCKY POWERS OF ATTORNEY LAW
By Carolyn L. Kenton and Katie E. Finnell
UPDATE: Kentucky revised the Power of Attorney Act again in July 2020. Read about the changes here.
During the most recent legislative session, Kentucky’s General Assembly adopted part of the Uniform Power of Attorney Act (UPOAA) in Kentucky House Bill 11.
Why did Kentucky adopt it?
The laws regarding powers of attorney in Kentucky were very old, provided no guidance, and were no longer appropriate. The new law provides guidance and instructions for the person signing the POA (the principal), the person to act as the POA (the agent), the attorney drafting the document, and the entities receiving the document (banks, insurance companies, etc.). This is a major change to how powers of attorney, which are meant to last a life-time, are to be governed.
When does the new law go into effect?
The law becomes effective on July 15, 2018 for all documents executed after that date. Previously executed documents will still be valid but should be reviewed every few years or when major life changes have occurred.
What does it do?
This new legislation provides specific definitions and procedures necessary to ensure the power of attorney’s validity in the eyes of the law and in the eyes of entities accepting the power of attorney. This is especially important when the principal has become incapacitated in some way, such as developing dementia, and becomes fully dependent on the assistance of their power of attorney.
The three big topics the new legislation addresses:
Definitions and procedures: An extensive list of definitions including who is the agent and principal, what does durability and incapacity mean, and what “to sign the document” means. It makes a major change in the signing process by requiring the principal to sign the document before “two (2) disinterested witnesses” and a notary. It provides a way for a principal who cannot physically sign a document but can communicate their “concise direction” to execute a power of attorney (it explains how someone else can sign for them). The power of attorney is now specifically effective when executed and durable unless stated otherwise in the document. The law details procedures to implement a springing power of attorney when one is used. The law also dictates when a power of attorney terminates or when and how an agent can resign or be removed such as when a guardianship determination is made by the court.
Responsibilities, Duties and Accountability of the Agent: This section of the law adds in requirements totally absent in the previous law. Agents are now required to act in good faith, loyally for the principal’s benefit and with care, competence and diligence. Agents are required to keep a record of all monies received and disbursed and any transactions made on behalf of the principal. The records are to be made available to the principal, a court or governmental agency or testamentary fiduciary upon request. The law limits the agent’s financial or personal liability for their actions unless they engage in “bad behavior”. The statute lists who may petition the District Court to review the power of attorney’s conduct. The law specifically permits co-agents to exercise their authority individually unless specified otherwise in the document. An agent who has actual knowledge of “bad behavior” by another agent of the same principal is required to notify the principal or take other action to safeguard the principal’s best interest and if the agent fails to do so, the agent is liable for the foreseeable damages which were incurred by the failure to act.
Third Party Acceptance: The law clarifies and specifies who is required to accept the power of attorney and when and what are the options if the third party is not sure of its validity. The law puts a time limit for rejection of the document after it has been presented for acceptance and if further authentication is requested, there is a time limit after such authentication is received for the document to be accepted. The law lists the reasons under which a valid rejection may be made and provides protection from liability to the person or entity who accepts a power of attorney in good faith. In addition, the person accepting the power of attorney “shall not be responsible to determine or ensure the proper application of funds or property by the agent.”
In this age of extended life expectancy, powers of attorney have become vital and necessary documents. This legislation expands and strengthens the law in order to protect all parties involved. When properly drafted and used, powers of attorney are able to be used through diminishing competency such as dementia. The alternative to needing and not having a valid power of attorney once someone has diminished competency is to seek the assistance of the guardianship court.
Powers of Attorney are an important estate planning tool. These documents are recommended for all adults over the age of eighteen.