Kansas Criminalizing Financial POA Attorneys in Fact?
Currently, the Kansas Legislature is considering Senate Bill 57 which could significantly change the law regarding financial powers of attorneys and possibly criminalize the actions of the attorney in fact. Similar proposals were initial introduced by the Kansas Attorney General Medicaid Fraud Division in 2013. The bill was introduced again in 2014 but opponents to the bill were able to obtain review of the language by the Kansas Judicial Council.
http://www.kslegislature.org/li/b2015_16/measures/documents/sb57_00_0000.pdf
The definition of “best interest” provides that the attorney in fact is acting in the best interest of the principal if an act “is consistent with the principal’s intent as expressed in the power of attorney.” This definition fails to equally approve a verbal instruction of a principal who has capacity to the attorney in fact to take a specific action, which although authorized in the power of attorney, might not otherwise be considered to be in the principal’s best interest. For example, the principal instructs his attorney in fact to sell a large number of stocks in Apple in the fall of 2014, only to see Apple being valued at over $700B in 2015, such as a huge hedge fund, Bridgewater Associates did in 2014.
Section 2 of the Bill amends 58-652(a) of the Act, which only relates to what is required to be in a power of attorney for it to be durable, i.e., not terminated by a subsequent disability. Yet the requisite warning statements to both the principal and attorney in fact which must be included in financial powers of attorney are inserted in subsections (4) and (5) of such subsection (a).
Section 2 of the Bill inserts subsection (2) in 58-652(b), providing that “Any acts done by the attorney in fact not in the best interest of the principal are in violation of the Kansas power of attorney act, unless such acts are otherwise specifically authorized in the power of attorney.” [Italicization inserted].
Section 2 of the Bill additionally inserts subsection (3) in 58-652(b), providing that “Any acts done by the attorney in fact to intimidate or deceive the principal in procuring the power of attorney are in violation of the Kansas power of attorney act. Would this language ensnare concerned family members who see the diminishing capacity of a loved one and strongly encourage their loved one to create a financial power of attorney because of their diminished capacity?
Section 2 of the Bill further inserts a new subsection (d)(1) in 58-652, which specifically requires a notary public not only to acknowledge the signature of the principal, but also to acknowledge that such person “has read the ‘Notice to Person Accepting the Appointment as Attorney in Fact,’ and that such person understands and acknowledges the legal responsibilities imposed upon such person as attorney in fact.” This is problematic. Scant few notary publics would ask the question of the person signing as the attorney in fact to inquire if they read and understand the language in the power of attorney document, especially the Notice. Most notary publics verify the identity of the person signing the document and give witness to the authenticity of the signature and the person who made their mark.
Most likely in my practice, because of this language, I would be counseling my client, the principal who is creating the power of attorney, that I represent him or her and that there are serious ramifications for the person who agrees to become your attorney in fact and I believe the proposed attorney in fact needs to seek out their own legal counsel to explain the law, the requirements and the Notice to the attorney in fact and answer any questions he or she may have. Consequently, the fee I charge to draft financial powers of attorney will increase due to the extra legal risks for drafting such a document and most proposed attorneys in fact are not likely to be happy to hear they might be hiring their own legal counsel to explain the legal risks they are agreeing to if they sign the POA as the attorney in fact.
Section 2 of the Bill also inserts a new subsection (f) in 58-652, providing that a person in good faith contracts with, buys from or sells to an attorney in fact is protected as if the attorney in fact properly exercised such power, regardless of whether the authority of such person as the attorney in fact has been terminated or invalidated. This provision does not extend to third parties, like banks and commercial institutions, who are not contracting but simply accepting the power of attorney. Moreover, does the good faith requirement now mean that third parties much check the date of the power of attorney to determine whether the requisite warnings are included, and if so, that the verbiage is correct, that it is in the proper boldface type, as well as reviewing the date of the power of attorney to determine whether such warnings are required in the first instance? If third parties do not, do they incur the risk of not being in good faith and therefore possibly being held liable for the acts of the attorney in fact due to such third party accepting such attorney in fact’s authority thereunder?
