Kentucky Power of Attorney Update

from Living Well 60+ September/October 2020

Misconceptions About Caregiving & Stress

July 2020 Revision: What You Should Know About

by Mary Ellis Patton, Bluegrass ElderLaw, PLLC

In July 2020, a new revision to Kentucky’s Uniform Power of Attorney (UPOA) Act took effect. This was the second big change in the past two years. In 2018, Kentucky adopted parts of the UPOA Act. The new law adopted some additional portions of the act.

First, let’s get a few terms defined. are limited to the annual gift tax A power of attorney (POA) is a exclusion ($15,000 for 2020). The legal document where one person gifts may be made to any “person,” (the principal) gives another person but the agent should consider the (the agent or attorney-in-fact) the principal’s history of gift making and authority to do certain acts on the other factors. If you have specific principal’s behalf. people to whom you want your agent to make gifts, you should specify that What are the big changes you in your document. Additionally, for should know about? individuals looking to use gifting as a 1. Witnesses. way to minimize assets and plan for

What are the big changes youshould know about?

1. Witnesses.

The law changes the requirement for the way these documents are signed. The 2018 rule required two disinterested witnesses to watch the principal sign the document, and then they had to sign it themselves. The law is back to requiring only a notary to witness the principal’s signature, and then the notary will sign the document as well. However, many states still require two witnesses. If the principal has business out of state or winters in another state, two witnesses would be advisable.

2. Gifting.

Next, the new law gives specific rules regarding the agent’s ability to make gifts on behalf of the principal. If you want your agent to be able to make gifts, this must be specifically stated. If there is no reference to the ability to make gifts, gifts cannot be made. If the document gives the agent the general right to make gifts without further instructions, gifts are limited to the annual gift tax exclusion ($15,000 for 2020). The gifts may be made to any “person,” but the agent should consider the principal’s history of gift making and other factors. If you have specific people to whom you want your agent to make gifts, you should specify that in your document. Additionally, for individuals looking to use gifting as a way to minimize assets and plan for Medicaid, the $15,000 restriction is insufficient.

3. Express General Powers

The new law requires that the authority to do certain acts be “expressly authorized.” This means that unless your power of attorney document outlines certain things, your agent cannot do them. The new law also outlines some default powers certain phrases create. Here are several highlighted powers. (This list is not inclusive of all items in the new statue.)

A. Banking. A general power regarding banking or financial institutions will allow your agent to open, continue, modify or close accounts; withdraw funds from the account, including check writing; borrow money and sign promissory notes; and apply for credit or debit cards for you as well as use them.

B. Maintenance. A general power for personal and family maintenance allows your agent to do certain things to benefit your spouse, children or others you have “customarily” supported. This includes a wide range of actions, including paying for housing, education, child care and even vacations. Importantly, the current law says this power is not restricted by the gifting provisions.

C. Retirement. Giving your agent general authority regarding your retirement plans allows the agent to select the form and timing of payments; to withdraw benefits; make rollovers; and establish and make contributions to a retirement plan, as well as borrow from or sell assets from a retirement plan. Any ability to make changes to beneficiaries should be specifically stated.

D. Other. The act also defines actions that may be taken regarding taxes, real estate, insurance, annuities and stocks and bonds.

Why Should This Matter to You?

The new act applies to all powers of attorney executed before or after it took effect. So even if your power of attorney was signed before July 2020, it is subject to these new rules.

While in some circumstances, it is great these powers have been defined in such a specific way, it is problematic because many individuals will not understand what they are signing.

What Should You Do?

Review your power of attorney to see what it actually says. If it uses some of the general phrases listed above, you may want to contact a qualified estate planning or elder law attorney to review the document.

If you have a simple one-page power of attorney that authorizes your agent to act “in my name and stead in any instance,” you need to have your document updated. You should contact a qualified attorney to do so.