BILL ANALYSIS Ó
AB 1082
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Date of Hearing: May 10, 2011
ASSEMBLY COMMITTEE ON JUDICIARY
Mike Feuer, Chair
AB 1082 (Gatto) - As Introduced: February 18, 2011
PROPOSED CONSENT (As Proposed to be Amended)
SUBJECT : Powers of attorney: statutory form
KEY ISSUE : Should the same protections that are granted to
non-statutory form powers of attorney be granted to powers OF
attorney created using the statutory form provided in the
Probate Code?
FISCAL STATUS : As currently in print this bill is keyed
non-fiscal.
SYNOPSIS
Under current law, there are two basic methods to create a power
of attorney. An individual can fill out a power of attorney
based on a form provided in the Probate Code, or he or she can
create some other writing that meets certain formalities. The
current protections against fraud and abuse in each method
differ in significant ways. While powers of attorney created
without using the statutory form grant general authority to an
agent, under that method, an agent needs express consent to
perform various activities that could involve significant
transfers or abuse of the principal's assets. Currently, these
protections explicitly do not extend to powers of attorney
created using the statutory form provided in the Probate Code.
Powers of attorney created using a statutory form allow a
principal to choose what specific areas the principal would like
to grant authority. Within each of these areas, an agent is
granted wide ranging powers. Many of these powers do not
require express consent in the power of attorney document itself
as would be required under non-statutory form powers of
attorney. To protect against the potential fraud and abuse that
might arise from this broader authority, this bill, supported by
the Trusts and Estate Section of the State Bar, seeks to extend
the same protections that apply in non-statutory power of
attorney to statutory powers of attorney.
SUMMARY : Seeks to expand the same enumerated protections that
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are extended to non-statutory form powers of attorney to
statutory form powers of attorney. Specifically this bill :
1)Extends the provisions governing the authority of an
attorney-in-fact (that currently apply to any power of
attorney not created using the form provided in the Probate
Code) to the statutory form power of attorney. Excludes
provisions that grant non-statutory form agents general
authority.
2)Revises certain powers of the attorney in fact that require
express authority in the power of attorney document.
3)Provides that an attorney-in-fact under either a statutory
form or non-statutory form power of attorney can modify,
revoke, or terminate a trust as provided for in the trust
document, only with express authority granted in the power of
attorney instrument.
4)Specifies that the attorney-in-fact may reject, disclaim,
release, or consent to a reduction or modification of a share
in, or payment from, an estate, trust, or other fund, only
with express consent by the principal.
5)Revises the attorney-in-fact's power under a statutory form
power of attorney with regard to insurance, annuity, and
retirement plan transactions and estate, trust and other
beneficiary transactions, requiring express consent to change
beneficiaries in these areas.
6)Revises the statutory form power of attorney to notify the
principal that the power of attorney does not include all of
the powers available under the Probate Code.
7)Provides that the authority of an attorney-in-fact's with
respect to family maintenance is not dependent on any other
grant of authority for the agent to make gifts on the
principal's behalf, and is also not limited by any limitation
placed on the agent's authority to make gifts on the
principal's behalf.
EXISTING LAW :
1)Provides that a power of attorney created without using the
statutory form power of attorney grants the attorney-in-fact
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(the agent) "all the authority to act that a person having the
capacity to contract may carry out" on behalf of the principal
(the person granting an agent the power to act on their
behalf). These powers only extend so far as they have not
been limited in the power of attorney to certain "actions,
subjects, or purposes." (Probate Code Section 4261; all
references are to this code unless otherwise indicated.)
2)Provides that an agent acting under a non-statutory power of
attorney is not authorized to undertake the following actions
unless expressly authorized in the power of attorney:
a) Create, modify, or revoke a trust.
b) Fund with the principal's property a trust not created
by the principal or a person authorized to create a trust
on behalf of the principal.
c) Make or revoke a gift of the principal's property in
trust or otherwise.
d) Exercise the right to make a disclaimer on behalf of the
principal.
e) Create or change survivorship interests in the
principal's property or in property in which the principal
may have an interest.
f) Designate or change the designation of beneficiaries to
receive any property, benefit, or contract right on the
principal's death.
g) Make a loan to the attorney-in-fact. (Section 4264.)
3)Provides that the provisions listed in #2 above do not apply
to powers of attorney created using the statutory form power
of attorney. (Section 4260.)
4)Establishes a form that can be used to create a
power-of-attorney that allows a principal to initial each area
where the principal would like to grant authority to an agent
to act on his or her behalf. (Section 4401.)
5)Provides within the powers enumerated in the statutory power
of attorney form, the attorney-in-fact has broad powers to act
including:
a) The power to contract in any way with anyone to
accomplish the purpose of a transaction.
b) Execute legal documents the agent "considers desirable
to accomplish a purpose of a transaction."
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c) Or "Ŭi]n general, do any other lawful act with respect
to the subject." (Section 4450.)
6)Provides that an attorney-in-fact can designate or change the
beneficiaries to an insurance policy, an annuity contract, or
a retirement plan. (Sections 4457, 4462.)
COMMENTS : A power of attorney is an authorization in writing
that grants an agent specified powers to act on behalf of the
principal (i.e. the person who because of age or infirmity
allows someone else to act on their behalf). (People v. Ranger
Ins. Co (1994), 31 Cal.App.4th 13, 21); Section 4022.) The
person to whom authority is granted to act on behalf of someone
else is called the attorney-in-fact, or the agent of the
principal. California law provides for two methods of creating
a power of attorney. A power of attorney can be created by
filling out a simple statutory form provided in the Probate Code
(see Section 4401), or it can be created in a writing meeting
certain formal requirements. (See Section 4121.) Under current
law, different levels of protection against fraud and abuse
apply to each method of creating a power of attorney.
Although a power of attorney created without the statutory form
grants the attorney-in-fact broad powers to act on behalf of the
principal, there are important limitations to these powers. For
example, unless the non-statutory form power of attorney
expressly allows the agent to create or modify a revocable
trust, make or revoke a gift of the principal's property,
designate or change the beneficiaries to receive property or
benefits, or make a loan to the attorney-in-fact, the agent is
granted no power to do so. This serves to limit the ability of
the attorney-in-fact to act in situations when the potential for
abuse and potential to transfer significant amounts of the
principal's assets are especially high.
By statute, these same protections do not apply to a power of
attorney created using the statutory form. On the statutory
power-of-attorney form several specific powers are provided in a
list. The principal who is creating the power of attorney then
initials which powers he or she would like to grant to the
attorney-in-fact (i.e. real property transactions, stock and
bond transactions, tax matters, estate, trust and other
beneficiary transactions etc.). Once these powers have been
initialed on the statutory form, the agent has a broad range of
powers to act within each area that has been initialed. For
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example, they may contract with any person under that power,
execute various legal forms to carry out the powers that are
granted, reimburse themselves for expenditures made in
exercising those powers, or "in general, do any other lawful act
with respect to the subject." (Section 4450.) As already
mentioned, agents acting under a statutory form are also granted
significant other powers, such as the power to change the
beneficiary on a life insurance, retirement, or annuity plan.
Many of these powers could not be granted under a non-statutory
power of attorney without express consent, and for the many
principals creating a power of attorney without an attorney, it
may not be clear to them that they are granting such powers.
This bill extends the same protections that now apply to
non-statutory powers of attorney to those created by filling out
the statutory form. The bill alters the enumerated powers that
can now be granted under a statutory form power-of-attorney to
protect against potential abuses and significant asset
transfers. For example, AB 1082 amends the powers of an agent
acting under the powers of estate, trust, and beneficiary
transactions category on the statutory form so that an agent
would need express consent by the principal to reject, disclaim,
release, or consent to a reduction or modification or reduction
in a trust or other fund of the principal. Express consent
would also be needed to create a trust. The bill also reigns in
the powers now granted to agents under the statutory form power
of attorney to change beneficiaries in insurance, annuity, and
retirement plans of the principal. It also makes clear that no
gifts can be made from the principal's assets without the
express consent of the principal in the power of attorney form.
To notify the principal that the powers being granted in the
statutory form power of attorney are being limited, this bill
also changes the language in the statutory form.
This bill simplifies the provisions applying to both statutory
and non-statutory powers of attorney by applying the same core
protections to each type of power of attorney. It also remedies
the potential for abuse that exists towards laypersons using
statutory powers of attorney without the aid of an attorney.
This approach is supported by various organizations and bar
associations across the country.
The Author Believes This Bill is Necessary to Protect the Wishes
and Property of the Principal : According to the author of this
bill, the purpose of AB 1082 is to "provide the same protections
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in a statutory form power of attorney" that already extend to
"all other powers of attorney under California law." This would
ensure that "certain potentially abusive powers to dispose of
the principal's property during lifetime or at death are not
given to an agent" without an express grant of those powers in
the power of attorney. The author contends that the difference
in levels of protection between a statutory form power of
attorney and other forms of powers of attorney creates two
problems.
First "Ŭi]n some cases, the statutory form power of attorney
expressly includes powers that could not be given to an agent
using a non-statutory form power of attorney unless the powers
were spelled out in the power of attorney document itself." For
example, some sections in the Probate Code could be read to
allow an agent to designate or change a beneficiary on an
insurance policy, annuity or retirement plan, a power prohibited
in non-statutory powers of attorney unless express consent is
given by the principal. (See Sections 4457 (d), (j) and
4462(b).)
Second, the author contends that:
Even where the statutory form does not expressly give the
agent the power to dispose of the principal's property, the
powers that are granted to an agent under the statutory
form power of attorney are so broad that they might be used
to carry out significant transfers.
This includes Section 4450(b) that allows agents to "contract in
any manner with any person" in relation to whatever categories
of transactions that a principal has authorized on the statutory
power-of-attorney form. According to the author, it is also
"not clear whether an agent under the statutory form document
could make a loan to himself or herself from the principal's
property."
Because the statutory form power of attorney is most often used
without the help of a lawyer, the author contends that the use
of statutory form powers of attorney without legal advice
creates a greater potential for abuse. Without the aid of an
attorney, the principal may "unintentionally grant his or her
agent broader powers than the principal realizes or intends."
Therefore, protections should be included under the statutory
form powers of attorney so that a principal does not give
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significant estate planning powers to an agent unless the
principal specifically makes clear that he or she intends to do
so.
The author also notes that the National Conference of
Commissioners on Uniform State Laws (NCCUSL) has adopted the
same types of protections granted to non-statutory powers of
attorney in California (Section 4264) but also extended these
protections to statutory form powers of attorney as well as
powers of attorney in general. These protections are reflected
in the Uniform Power of Attorney Act, drafted in 2006, as well
as laws in other states, including, Kansas, Missouri and
Washington.
A Growing Consensus Understand the Need to Protect Seniors From
Misuse of the Power of Attorney : In preparation of the Uniform
Power of Attorney Act, a nationwide survey was conducted by the
Joint Editorial Board for Uniform Trust and Estate Acts to
determine what provisions should be included in laws governing
powers of attorney. The survey polled the elder state law
sections of all state bar associations as well as several
professional organizations that specialize in elder and estate
law across the country. Of those polled, more than seventy
percent reached a consensus that a power of attorney statute
should require gift making authority to be expressly stated in
the power of attorney, and include safeguards against abuse by
the agent. It was based on these findings that the NCCUSL
drafted the Uniform Power of Attorney Act in 2006, including
enhanced protection for both statutory and non-statutory form
powers of attorney. (See Prefatory Note, The Uniform Power of
Attorney Act (2006), NCCUSL, available at
http://www.law.upenn.edu/bll/archives/ulc/dpoaa/2008_final.htm.)
Author's Amendment : In order to ensure that individuals using
the statutory form understand that if they want to add certain
powers to their agents they must separately list those powers,
the author rightly proposes to amend the statutory form as
follows:
On page 4, first paragraph, delete "The powers granted by this
document do not include all powers that are available under
the Probate Code" and insert: The powers listed in this
document do not include all powers that are available under
the Probate Code. Additional powers available under the
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Probate Code may be added by specifically listing them under
the Special Instructions section of this document
ARGUMENTS IN SUPPORT : In support of this bill the Trust and
Estates Section of the State Bar of California writes:
This bill would extend important protections that are
already provided for under California's power of attorney
law to statutory form powers of attorney?California law
allows an individual to use a power of attorney to grant
very broad authority to an agent to act on the principal's
behalf. However, California Probate Code § 4264 lists
certain actions that are so important, or so subject to
possible abuse, that they cannot be authorized in a power
of attorney unless they are specifically spelled out in the
power of attorney document. These restrictions generally
involve the ability to dispose of the principal's property,
such as the ability to make a gift, to disclaim assets, to
make or change a beneficiary designation (such as on a life
insurance or annuity policy or a retirement plan) or to
change survivorship interests in the principal's property,
or to make, amend or revoke a trust?. These types of
actions are especially susceptible to abuse, if the agent
uses these powers to benefit himself or herself?. Probate
Code § 4264 requires that those powers be expressly stated
in the power of attorney so that the principal will have an
opportunity to consider and make an informed decision about
whether to give the agent the power to take those
particular actions?
These important protections under California law do not
presently apply to statutory form powers of attorney.
There is no reason why individuals who use the statutory
form power of attorney should not be given then same
protections that apply to any other person who grants a
power of attorney in California. Indeed, because the
statutory form power of attorney is most often used by lay
persons without legal advice, it is particularly important
that the simplified statutory form not grant very broad
powers to an agent without the principal's knowledge or
informed consent. An individual signing a per-printed
statutory power of attorney form would have no way of
knowing just from reading the form that checking the boxes
for particular powers, or checking "all of the above,"
might give the agent the power to make gifts to the agent
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or others, or the power to change the beneficiary
designations for the principal's life insurance or IRA.
ŬThe Trusts and Estates Section of the State Bar of
California] therefore supports AB 1082 and believes that
its enactment will provide important additional safeguards
for all Californians, including those who choose to use the
simplified statutory form power of attorney to plan for
incapacity and carry out their personal and financial
goals.
REGISTERED SUPPORT / OPPOSITION :
Support
Trust and Estates Section of the State Bar of California
Opposition
None on file
Analysis Prepared by : Drew Liebert and Travis Brooks / JUD. /
(916) 319-2334