BILL ANALYSIS                                                                                                                                                                                                    Ó






                             SENATE JUDICIARY COMMITTEE
                             Senator Noreen Evans, Chair
                              2011-2012 Regular Session


          AB 1082 (Gatto)
          As Amended May 17, 2011
          Hearing Date: June 21, 2011
          Fiscal: No
          Urgency: No
          TW   
                    

                                        SUBJECT
                                           
                Powers of Attorney:  Statutory Form Power of Attorney

                                      DESCRIPTION  

          Existing law provides two methods under which an individual can 
          grant authority to another person to make legal and financial 
          decisions for the individual:  (1) a non-form power of attorney; 
          and (2) a Uniform Statutory Form Power of Attorney (Form POA).  
          Existing law limits the grant of specific authorities in 
          non-form powers of attorney.  This bill would extend these 
          limitations on grants of specific authorities to Form POAs.  
          This bill also would clarify and remove inconsistencies between 
          the non-form and statutory form powers of attorney.  

                                      BACKGROUND  

          Existing law authorizes an individual to appoint another as his 
          or her attorney-in-fact or agent to act on his or her behalf in 
          legal matters.  Powers of attorney are particularly useful when 
          an individual becomes incapacitated or otherwise unable to make 
          legal and financial decisions for him or herself.  

          In 1994, the California provisions for powers of attorney were 
          removed from the Civil Code, reorganized, and recast under the 
          Probate Code.  (SB 1907 (Campbell, Ch. 307, Stats. 2004).)  At 
          that time, the California Law Revision Commission (CLRC), the 
          sponsor of SB 1907, stated that the reorganization was necessary 
          because the power of attorney provisions had been inserted 
          piecemeal throughout the Civil Code.  SB 1907 established two 
          methods of powers of attorney, a non-form power of attorney and 
          a statutory form power of attorney, with different requirements 
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          for each.  The state adopted the Form POA to make it easier for 
          people to execute a power of attorney without incurring the 
          legal expense of hiring a lawyer for this purpose.   

          Since 1994, the Form POA has changed little.  SB 158 (Machado, 
          Ch. 251, Stats. 2005) revised the Form POA to remove the 
          requirement of the principal's Social Security Number to address 
          increased reports of identity theft.  Although the provisions 
          regarding non-form power of attorney have been revised to 
          address elder abuse (i.e., limiting inappropriate gifts made by 
          an attorney-in-fact), the Form POA still does not have the same 
          protections from potential elder abuse as non-form powers of 
          attorney.

          In 2006, the National Conference of Commissioners on Uniform 
          State Laws (NCCUSL) adopted the Uniform Power of Attorney Act, 
          which distinguishes between grants of specific authority that 
          require express language in a power of attorney and grants of 
          general authority.  NCCUSL modeled the specific grant of 
          authority provision after California's Probate Code Section 
          4262, which provides specific grants of authority for non-form 
          powers of attorney.  NCCUSL recognized that assigning powers of 
          attorney over a principal's property and estate plan can have 
          devastating consequences to the principal, and certain powers 
          should be specifically enumerated so that the principal is clear 
          as to which powers are being granted.  

          This author-sponsored bill would extend to the Form POA the 
          protections over grants of authority contained in the non-form 
          powers of attorney statutes.  This bill also would clarify and 
          remove inconsistencies between the non-form and statutory form 
          powers of attorney.  

                                CHANGES TO EXISTING LAW
           
           1.Existing law  authorizes an individual to appoint another as 
            his or her attorney-in-fact or agent, to act in his or her 
            stead in legal matters.  (Prob. Code Sec. 4000.)

             Existing law  provides limits on general and specific powers 
            that can be granted by an individual to another in a power of 
            attorney.  (Prob. Code Sec. 4200 et seq.)
           
            Existing law  provides that a person may use a Form POA to 
            appoint another as his or her attorney-in-fact or agent, to 
            act in his or her stead in legal matters.  The appointment 
                                                                      



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            must meet specified requirements and must be executed 
            according to a prescribed procedure.  (Prob. Code Sec. 4400 et 
            seq.)
             
            Existing law  does not apply the same limits on specific grants 
            of authority in non-form powers of attorney to Form POAs.  
            (Prob. Code Sec. 4260.)
             
            This bill  would provide that the limits on grants of authority 
            to attorneys-in-fact contained in Probate Code Section 4200 et 
            seq., with exceptions, would apply to Form POAs.

           2.Existing law  provides that a power of attorney may not be 
            construed to grant authority to an attorney-in-fact to perform 
            any of the following acts unless expressly authorized in the 
            power of attorney:
           create, modify, or revoke a trust; 
           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;
           make or revoke a gift of the principal's property in trust or 
            otherwise; 
           exercise the right to make a disclaimer on behalf of the 
            principal;
           create or change survivorship interests in the principal's 
            property or in property in which the principal may have an 
            interest; 
           designate or change the designation of beneficiaries to 
            receive any property, benefit, or contract right on the 
            principal's death; and
           make a loan to the attorney-in-fact.  (Prob. Code Sec. 4264.)
           
            This bill  would add to the list above and require the 
            individual to expressly grant to the attorney-in-fact the 
            power to terminate a trust or reject, disclaim, release, or 
            consent to a reduction in, or modification of, a share in, or 
            payment from, an estate, trust or other fund on behalf of the 
            principal.

           1.Existing law  provides language required to be contained in a 
            Form POA.  (Prob. Code Sec. 4401.)

             This bill  would specify in the required notice language of the 
            Form POA that additional powers available under the Probate 
            Code may be specifically listed on the Form POA.   

                                                                      



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           2.Existing law  provides that, unless there is a conflicting 
            provision in the statutes governing Form POAs, in which case 
            the provisions of the Form POA statutes govern, the provisions 
            regarding non-form powers of attorney apply to Form POAs.  
            (Prob. Code Sec. 4407.)

             This bill  would provide that the non-form power of attorney 
            provisions apply to Form POAs except when there is a 
            conflicting provision under the Form POA statutes or when a 
            provision under the non-form power of attorney statutes 
            expressly states that the provision does not apply to Form 
            POAs.

           3.Existing law  provides that a person may grant to an 
            attorney-in-fact specific authority regarding insurance and 
            annuity transactions, including the ability to name the 
            attorney-in-fact as a beneficiary of the insurance or annuity 
            contract. (Prob. Code Sec. 4457.)

             This bill  would remove the ability of the attorney-in-fact to 
            name himself or herself as a beneficiary of an insurance or 
            annuity.

          4.Existing law  provides that a person may grant to an 
            attorney-in fact the ability to accept, reject, disclaim, 
            receive, receipt for, sell, assign, release, pledge, exchange, 
            or consent to a reduction in or modification of a share in or 
            payment from the fund established under a trust, probate 
            estate, guardianship, conservatorship, escrow, custodianship, 
            or other fund from which the person is, may become, or claims 
            to be entitled, as a beneficiary, to a share or payment.  
            (Prob. Code Sec. 4458.)
             This bill  would remove the grant of authority to an 
            attorney-in-fact to reject, disclaim, release, or consent to a 
            reduction in or modification of a share in or payment from the 
            fund.

             This bill  would authorize an attorney-in-fact to disclaim a 
            detrimental transfer to the person with the approval of the 
            court.

           5.Existing law  authorizes an attorney-in-fact to perform various 
            powers, as specified, with respect to the personal and family 
            maintenance of the person.  (Prob. Code Sec. 4460.)

             This bill  would add to these specified powers that the 
                                                                      



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            authority of the attorney-in-fact to provide for the personal 
            and family maintenance of the person is not dependent upon or 
            limited by any other grant of authority or limitation to make 
            gifts on the person's behalf.

           6.Existing law  provides that, with respect to a retirement plan, 
            among other things, an attorney-in-fact may be given authority 
            to designate beneficiaries.  (Prob. Code Sec. 4462.)

             This bill  would delete this provision.

           7.Existing law  provides that a Form POA does not empower the 
            agent to modify or revoke a trust created by the principal 
            unless that power is expressly granted by the power of 
            attorney.  (Prob. Code Sec. 4465.)

             This bill  would repeal and replace this provision and declare 
            that the Form POA does not empower the attorney-in-fact to 
            take any of the actions specified under Probate Code Section 
            4262 unless the Form POA expressly grants that authority to 
            the attorney-in-fact.

                                        COMMENT
           
          1.  Stated need for the bill  
          
          The author writes:
          
            The statutory form power of attorney is sometimes used by 
            lawyers but is more often used without the assistance of a 
            lawyer.  The common use of a statutory form powers of attorney 
            without legal advice creates both a greater potential for 
            abuse by unscrupulous persons and also a greater chance that 
            the principal may unintentionally grant his or her agent 
            broader powers than the principal realizes or intends.

            The purpose of this bill is to provide the same protections in 
            a statutory form power of attorney as for all other powers of 
            attorney under California law to be sure that certain 
            potentially abusive powers to dispose of the principal's 
            property during lifetime or at death are not given to an agent 
            unless the power of attorney expressly grants that power to 
            the agent.

          2.  Limiting powers an individual may grant to another under a 
            Form POA  
                                                                      



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          This bill would extend current limitations on granting authority 
          to another person that apply to a non-form power of attorney to 
          also apply to the Form POA.  Existing law provides that certain 
          powers must be specifically enumerated in a non-form power of 
          attorney.  (Prob. Code Sec. 4264.)  Further, existing law 
          provides that a power of attorney may not authorize an 
          attorney-in-fact to make, publish, declare, amend, or revoke the 
          individual's will.  (Prob. Code Sec. 4265.)

          The Executive Committee of the Trusts and Estates Section of the 
          State Bar of California (TEXCOM), in support of this bill, 
          argues that:
          
            California Probate Code ÝSection] 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 . . . or to change survivorship 
            interests in the principal's property, or to make, amend or 
            revoke a trust. . . . ÝB]ecause 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.

          The Form POA provides that an individual granting authority to 
          an attorney-in-fact may simply initial next to a broad category 
          of financial and legal transactions in order to transfer power 
          of authority.  These broad categories include real property 
          transactions, tangible personal property transactions, banking 
          and other financial institution transactions, and estate, trust, 
          and other beneficiary transactions.  The individual filling out 
          the Form POA and initialing next to these categories may or may 
          not have considered the ramifications of authorizing such broad 
          powers to another.  

          Certain actions that fall under these broad categories are 
          transferring real or personal property into a trust created on 
          behalf of beneficiaries, changing survivorship interests in the 
          person's property, and making a loan to the attorney-in-fact.  
          Non-form powers of attorney provide that these specific powers 
          must be expressly enumerated on the power of attorney to be 
                                                                      



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          valid.  Yet, the Form POA only prohibits an attorney-in-fact 
          from modifying or revoking the individual's trust.  (Prob. Code 
          Sec. 4266.)  Accordingly, under the current Form POA, an 
          attorney-in-fact could create a trust to be funded with the 
          individual's real and personal property and name the 
          attorney-in-fact's relatives as the beneficiaries.  The 
          attorney-in-fact could also loan to himself or herself money 
          from the individual's bank account.  These actions taken by the 
          attorney-in-fact may or may not have been considered by the 
          individual when he or she executed the Form POA.  This bill 
          would address these situations by requiring the individual to 
          specifically list these powers on the Form POA in order for the 
          attorney-in-fact to take these actions on the individual's 
          behalf.  

          A power of attorney is operative when the individual is 
          incapacitated or unable to make legal and financial decisions.  
          A layperson filling in the Form POA at the direction of the 
          proposed attorney-in-fact may be the subject of elder or 
          dependent adult financial abuse.  To provide protection for 
          these situations, this bill would require, pursuant to the same 
          limitations as for a non-form power of attorney, express 
          enumeration in the Form POA in order to grant these specific 
          powers. 
           

           Support  :  Executive Committee of the Trusts & Estates Section of 
          the State Bar of California

           Opposition  :  None Known

                                        HISTORY
           
           Source  :  Author

           Related Pending Legislation  :  None Known

           Prior Legislation :  

          SB 1907 (Campbell, Ch. 307, Stats. 2004) See Background.
          SB 158 (Machado, Ch. 251, Stats. 2005) See Background.

           Prior Vote :

          Assembly Floor (Ayes 78, Noes 0)
          Assembly Judiciary Committee (Ayes 10, Noes 0)
                                                                      



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