By: Michael Jon Shalbrack
An important part of the estate planning process includes the use of Durable Powers of Attorney (“POAs”), both for health care and property. POAs give someone else (the “agent”) the right to make decisions for you (the “principal”) or act in your place under certain circumstances. At a minimum, we suggest that everyone over 18 years of age should have a health care POA (and a property POA should also be strongly considered).
Recently, the Illinois legislature overhauled the Power of Attorney Act (Illinois Public Act 096-1195) (the “Act”), which will be effective July 1, 2011.
The new Act offers some clarity in dealing with many of the issues that principals, agents, and third parties face, including (1) the level of authority of agents, and (2) the potential liability for unauthorized actions taken by agents acting under the POA. Specifically, changes were made to provide additional protection to principals and to the third parties (such as physicians and banks) who rely on an agent’s authority to act on behalf of the principal. The changes were also designed to provide agents with a better understanding of their responsibilities and standard of care, and to provide a mechanism to ensure accountability of agents.
Does the Act mean that new POA forms are needed by everyone? The short answer is “no.” Pre-existing POA forms, properly executed, are considered valid under the new Act. As future estate planning is completed, however, the revised statutory forms set forth in the new Act should be used.
Below is a brief summary of some of the important changes to the Act:
- Revocation of Prior POAs. The statutory forms in the Act include an express statement revoking all prior POAs to avoid later confusion. Caution is suggested so that inadvertent revocations of old POAs do not occur through use of the new forms.
- Notices to Parties. The Act updates notices to the principal to better explain the importance of the POA. The Act also provides a new notice to explain the duties, responsibilities, and scope of authority of the agent.
- Agent’s Standard of Care in Acting. The Act specifies a heightened standard of care that the agent owes to the principal when acting on his or her behalf. It is especially important to discuss this standard of care when choosing agents under property POAs.
- Witnesses to POAs. The Act expressly limits who can witness the principal’s signature on a POA. Certain parties, including an attending physician or a relative of either the principal or agent, are prohibited from serving as witnesses to the POA.
- Three Options regarding Life-Sustaining Treatment. The Act changes the current health care form’s three levels of discretion on future life-sustaining care decisions. Principals still need to elect one of the three options, but the language is now consistent with current medical standards.
- Determination of Incapacity. The Act expands the definition of “incapacity” to include a written determination by the principal’s attending physician.
- HIPAA and Advanced Directives. The Act expands the list of parties entitled to information when promoting the interests of the principal. The provisions are designed to comply with the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). The Act also includes provisions designed to comply with the Disposition of Remains Act. Principals can now limit the authority of agents to make anatomical gifts.
- Acceptance of Roles. The Act includes greater detail regarding the role, authority, and liability of successor agents. The Act also provides new forms for both the initial and
successor agent to acknowledge their authority under a POA.
- Old POAs and POAs from Other States. The Act clarifies that POAs executed in accordance with either current Illinois law or the law of another state will continue to be valid under the new Act. The Act also continues to allow for non-statutory POAs, provided that they are in substantially the same form as the statutory forms set forth in the Act.
- Co-Agents. The Act also includes details concerning the appointment of co-agents under a non-statutory POA and develops a protocol for honoring their decision-making authority when acting together.
Mike Shalbrack’s practice covers a broad range of business issues affecting closely held business entities. He is a member of the firm and works in the Corporate & Business Law Group.
