MAJOR CHANGES IN THE FLORIDA POWER OF

ATTORNEY LAW:

Alan S. Gassman, Esq.agassman@gassmanpa.com

Recordings of this webinar and additional materials can be found at:http://www.gassmanresourcecenter.com/

previously.recorded.webinars.html

Copyright © 2011

What You Need to Know – With a View From the Bench

August 18, 2011

Judge Jack R. St. ArnoldPinellas County Probate Judge

Christopher J. Denicolo, Esq.christopher@gassmanpa.com

2

TABLE OF CONTENTS

Page Page

Citations......................................................................................... 8

New Law: Agent – Qualifications and Requirements… 27

Initial Summary………………….................................................. 9

Avoiding Financial Scams……………...…………..……… 29

A Judicial Perspective: A Summary of Judge St. Arnold’s Thoughts on the New Law and Its Effects………………………. 10

New Law: Authority of Agents – Powers Requiring Separate Signed Enumeration…………………………… 30

New Features of the Law…………………………………………… 11

Federal Tax Implications of Agents’ authority………… 31

5 Catastrophes That Can Happen as a Result of the New Florida Durable Power of Attorney Act………………………… 12

New Law: Agents – Modifiable Duties…………………… 32

Development of Powers of Attorney……………………………… 13

New Law: Agents – Mandatory Duties……………………. 33

Durable Power of Attorney Basics………………………………. 14

A Power of Attorney Agent Log……………………….…… 35

New Law: Springing Powers of Attorney..……………………… 17

Agents – Acceptance of Powers and Responsibilities…… 36

Florida Statute Section 709.2108………………..……………….. 18

Authority of Agents……………………………………….…. 37

Military Powers of Attorney Can Spring………………………… 19

Statute 709.2208(1) and (2)…………………………………. 39

Levels of Capacity…………………………………………………… 23

Liability of Agents…………………………………………… 41

New Law: Third Persons – Acceptance………………………… 24

Judge St. Arnold’s Thoughts on the New Law and Its Effects in the Context of Litigation and Judicial Interpretation………………………………………………… 46

New Law: Third Persons – Affidavits…………………………… 26 Author Biographies………………………………………… 48Copyright © 2011

2

Thank you Karen France!3

Copyright © 2011

4

Copyright © 2011

What Mary Poppins Didn’t Know About Umbrellas: Insure That Your Insurances Will Insure You

Thursday, August 25, 2011 at 5:30 p.m.Speakers: Alan Gassman and Chuck WassonTo register please visit: https://www2.gotomeeting.com/register/649755250

Special Planning Needs for Doctors Who Are Married To DoctorsMonday, August 29, 2011 at 5:30 p.m.

Speakers: Alan Gassman and Lester PerlingTo register please visit:https://www2.gotomeeting.com/register/739715802

The 15 Minute Guide to the New Florida Power of Attorney Act – Essential Information on Important Changes

Tuesday, August 30, 2011 at 5:30 p.m.Speaker: Alan GassmanTo register please visit:https://www2.gotomeeting.com/register/872973338

Riders on the Storm: How To Make Sure Your Insurances Do Not Have Any Catastrophic Exceptions

Monday, September 12, 2011 at 5:30 p.m.Speakers: Alan Gassman and Chuck WassonTo register please visit:https://www2.gotomeeting.com/register/947445370

5

UPCOMING WEBINARS

Copyright © 2011

PREVIOUSLY RECORDED WEBINARS:To view these webinars and download the accompanying

PowerPoint presentations please visit:www.gassmanresourcecenter.com/previously.recorded.webinars.html

•Giving A Deposition? What Doctors Need to Know•Helter Shelter – Understanding Credit Shelter Trusts Under the New Estate Tax Law•Understanding ACO’s in 30 Minutes – A Physicians Guide•How to Advise Clients Under the New Estate Tax Law•Unannounced Medicare Audits – What To Do If Investigators Come To Your Office•A Medicare Practice Compliance Paperwork Checklist for Medical Practices•What Has Just Changed With Regard To Undisclosed Foreign Accounts•When & How To Terminate A Questionable Employee•Protecting Medical Practices From Creditors – General Strategies and Common Mistakes•Creditor Protection for the Single Floridian•Creditor Protection for the Single Physician•For Couple’s Only – All About Tenancy By The Entireties – When To Use It – When To Lose It•How Medical Practices Can Respond to the New Healthcare Law and Eminent Changes•Malpractice Litigation Defense Strategies for Florida Physicians•Cornflakes and Estate Planning Mistakes•New Healthcare Price Transparency Bill•How the New Pain Care Clinic Regulations Affect Your Medical Practice

6

Copyright © 2011

All proceeds go to the Clearwater Bar.

7

Copyright © 2011

CITATIONS Florida law governing powers of attorney and similar instruments is in Chapter 709 of

Florida Statutes.

Florida legislature passed SB 670 to significantly revise Chapter 709.

SB 670 was signed by Governor Rick Scott on June 21, 2011.

Codified as Ch. 2011-210, Laws of Florida.

Effective: October 1, 2011 The text of this bill is available at:

http://www.flsenate.gov/Session/Bill/2011/0670/BillText/er/PDF

Article by Tami Conetta can be found at

http://www.flprobatelitigation.com/uploads/file/ATLC11_Conetta.pdf.

Article by Matthew Ahearn can be found at http://www.deanmead.com/CM/Custom/The

%20New%20Florida%20Power%20of%20Attorney%20Act.pdf.

Article by Florida Bar Real Property, Probate, & Trust Law Section, with additions by Charlie

Robinson can be found at

http://www.suncoastepc.org/Suncoast-FL/Library/FPOA_White_Paper.pdf, although written

pre-adoption of the statute.

Article on avoiding financial scams can be found at

http://www.clarkskatoff.com/general.php?category=Power+of+Attorney+Abuse+Article

Military powers of attorney are covered by 10 U.S.C. § 1044b, discussed on pages 19 and

37.

8

Copyright © 2011

INITIAL SUMMARY Powers of Attorney “grandfathered” under the

new law: A power of attorney executed before October 1,

2011, if its execution complied with Florida law. A power of attorney executed in another state, if its

execution complied with the law of that state. The certain powers that require separate signed

enumeration in the new law do not apply to a power of attorney executed before October 1, 2011.

Changes to the formalities of execution do not apply to a power of attorney created before October 1, 2011.

Rights acquired by a qualified agent under a power of attorney existing on October 1, 2011 are not affected by the new law, and any power of attorney that is in existence on October 1, 2011 is not invalidated.

The new law does not affect conduct of an agent occurring before October 1, 2011.

9

Copyright © 2011

A JUDICIAL PERSPECTIVE: A SUMMARY OF JUDGE ST. ARNOLD’S THOUGHTS ON THE

NEW LAW AND ITS EFFECTS

10

Copyright © 2011

NEW FEATURES OF THE LAW

A power of attorney executed in Florida on or after October 1, 2011, is valid if its execution complies with § 709.2105.

A power of attorney executed in Florida before October 1, 2011, is valid if its execution complied with the law of Florida at the time of execution.

A power of attorney executed in another state (even if it does not comply with Florida’s requirements) is valid if its execution complied with the law of the state of execution at the time of execution The statute is not clear whether a springing power of attorney

validly executed and permitted under the law of another state will be effective in Florida after October 1st, but probably not.

See pages 17—22 on springing powers of attorney. A military power of attorney is valid if it is executed in

accordance with 10 U.S.C. § 1044(b). A deployment contingent power of attorney may be signed in advanced and is effective on the deployment of the principal (also discussed on pages 19 and 37).

A photocopy or electronically transmitted copy of an original power of attorney has the same effect as the original, except as otherwise provided in the power of attorney.

11

Copyright © 2011

5 CATASTROPHES THAT CAN HAPPEN AS A RESULT OF THE NEW FLORIDA DURABLE POWER OF ATTORNEY ACT

1. Signing a springing power of attorney: will have no force or effect after Sept. 30, 2011.

2. Authorizing the agent to conduct certain actions, without separately signing or initialing each provision, will not be sufficient to allow the agent to do any of the following:

a. Create an inter vivos trust (living trust): the terms of the trust agreement may prevent amendment or termination by an agent under a power of attorney.

b. Amend, revoke, or terminate a trust created by or f/b/o the principal (if the trust instrument allows it)

c. Make a gift subject to § 709.2202(3), see page 30;d. Create or change rights of survivorshipe. Create or change a beneficiary designationf. Waive the principal’s rights to be a beneficiary of a joint and survivor annuity, including a

survivor benefit under a retirement plang. Disclaim property or powers of appointment

3. Executing a power of attorney after Sept. 30, 2011 without having two witnesses and a notary to each signature.

a. Before October 1, 2011, two witnesses would be sufficient if the power of attorney is not a “durable power of attorney,” or if the agent will not be transferring real estate or signing other documents that require notarization and “equal dignity.”

b. Note: Healthcare powers of attorney require that the two witnesses not be related to the person giving the power.

4. An agent is not eligible for compensation, unless the agent is an individual who is a Florida resident that has never been an agent for more than three principals at the same time; or the agent is: the spouse or an heir of the principal, a financial institution that has Florida trust powers, or a Florida licensed attorney or C.P.A.

How many illegal contracts will be entered into as the result of this?

5. Granting someone a power of attorney that you do not trust 100%.a. Ne’er well to do agents may seek to have principals sign new powers of attorney because of

recent articles and publicity, and will then take advantage of them.12

Copyright © 2011

DEVELOPMENT OF POWERS OF ATTORNEY

•The concept of the Power of Attorney originated from commercial Agency Law.• Power of Attorney Contracts go back as far as 561 B.C.

Contract for Power of Attorney, First year of Evil-Merodach, 561 B.C.It clearly empowers one brother to act in business for another.

“ITTI-NABU-BALATU, the son of Shula, the son of Egil acts in place of Bel-kishir, his brother, (who) has not gone into business. With reference to their securities and whatever property belonged to Shula, their father, (which) they have shared with one another, in so far as it belongs to Bel-kishir, it shall go into the business, and whatever profit arises from traffic (literally, the street), however much he may gain in this way, he shall bring all unto and to Bel-kishir deliver. His hand for this he raised. (This document is attested in the usual manner, and dated) Markheswan thirteenth, of Evil-Merodach's first year.”

From: George Aaron Barton, "Contracts," in Assyrian and Babylonian Literature: Selected Transactions, With a Critical Introduction by Robert Francis Harper (New York: D. Appleton & Company, 1904), pp. 256-276

• The first case in Florida that recognized the Power of Attorney was in 1847.

Randall v. Parramore, 1 Fla. 409 (1847).

A third person appeared on behalf of defendant to deny jurisdiction, claiming that defendant is a French citizen not bound to appear in a U.S. court. He presented a “letter of agency” or power of attorney. Court holds that an agent cannot answer unless he is named in the libel.

13

Copyright © 2011

DURABLE POWER OF ATTORNEY BASICS

Durable Power of Attorney – except as otherwise provided, a power of attorney is durable if: It contains the words “This durable power of attorney is not terminated by

subsequent incapacity of the principal except as provided in chapter 709, Florida Statutes;” or

It contains similar words that show the principal’s intent that the authority conferred is exercisable notwithstanding the principal’s subsequent incapacity.

If the power of attorney is silent, then it is NOT a durable power of attorney (i.e., it terminates upon the principal’s incapacity).

“Incapacity” means the inability of an individual to take those actions necessary to obtain, administer, and dispose of real and personal property, intangible property, business property, benefits and income.

A principal may revoke a power of attorney by expressing the revocation in a subsequently executed power of attorney or other writing signed by the principal. The principal may give notice of the revocation to an agent who has accepted

authority under the revoked power of attorney.

The execution of a new power of attorney does not revoke a power of attorney previously executed by the principal.

14

Copyright © 2011

DURABLE POWER OF ATTORNEY BASICS The power of attorney terminates when:

Principal dies; Principal becomes incapacitated (if the power of attorney is not durable); Upon the filing for a petition of involuntary guardianship; Principal is adjudicated totally or partially incapacitated by the court; Principal revokes the power of attorney; Power of attorney provides that it terminates; The purpose of power of attorney is accomplished; or

The court must look to the language of the instrument, as with any other contract, in order to ascertain its object and purpose. The language of the agreement must be construed in such a manner so as to carry out the intent of the principal.. Johnson v. Fraccacreta, 348 So.2d 570, 572 (Fla. 4th DCA 1977).

NEW! – An agent’s authority terminates (and the power of attorney does not provide for another agent to act) if there is a dissolution or annulment action filed with respect to the marriage between the principal and agent, unless the power of attorney otherwise provides.

15

Copyright © 2011

DURABLE POWER OF ATTORNEY BASICS An agent’s authority is suspended when any person initiates judicial

proceedings to determine the principal’s incapacity or voluntary guardianship. The authority will be suspended until the petition is:

Dismissed, Withdrawn, or The court enters an order authorizing the agent to exercise one or more

powers granted under the power of attorney. Voluntary Guardianship: Desired court supervision without a finding of

mental incompetency. See Bryan v. Century Nat. Bank, 498 So.2d 868, 872 (Fla. 1986).

Emergency Powers: If an emergency arises after initiation of guardianship proceedings to determine incapacity and before adjudication regarding the principal’s capacity, the agent may petition the court in which the proceeding is pending for authorization to exercise a power granted under the power of attorney. The petition must set forth the nature of the emergency, the property or matter involved, and the power to be exercised by the agent.

Any termination or suspension is not effective as to an agent who, without knowledge of the termination or suspension, acts in good faith, and such an action would bind both the principal and principal’s successors in interest.

16

Copyright © 2011

NEW LAW: SPRINGING POWERS OF ATTORNEY Springing powers of attorney are not effective under the new

law if signed on or after October 1, 2011. A springing power of attorney is a power of attorney conditioned on the

principal’s incapacity (or on any other future event or contingency) and has no force or effect (does not become exercisable) unless or until that date.

If the power of attorney is executed in a different state on or after Oct. 1, 2011, it might be valid if that separate state specifically recognizes spring powers of attorney. See pages 17—22.

If executed before October 1, 2011, the springing power of attorney: Remains valid (with springing feature) A power of attorney that becomes exercisable upon incapacity can only

be used after the delivery of the affidavit of a medical or osteopathic physician licensed in the state of Florida who has primary responsibility for the treatment and care of the principal. See page 18

If signed after October 1, 2011, the springing power of attorney : Is ineffective as to the entire power of attorney

Exception: Military powers A deployment-contingent power of attorney will be effective (see page

19 & 37).

17

Copyright © 2011

FLORIDA STATUTE SECTION 709.2108

709.2108. When power of attorney is effective

(1) Except as provided in this section, a power of attorney is exercisable when executed.

(2) If a power of attorney executed before October 1, 2011, is conditioned on the principal's lack of capacity and the power of attorney has not become exercisable before that date, the power of attorney is exercisable upon the delivery of the affidavit of a physician who has primary responsibility for the treatment and care of the principal and who is licensed to practice medicine or osteopathic medicine pursuant to chapter 458 or chapter 459 as of the date of the affidavit. The affidavit executed by the physician must state that the physician is licensed to practice medicine or osteopathic medicine pursuant to chapter 458 or chapter 459, that the physician is the primary physician who has responsibility for the treatment and care of the principal, and that the physician believes that the principal lacks the capacity to manage property.

(3) Except as provided in subsection (2) and s. 709.2106(4), a power of attorney is ineffective if the power of attorney provides that it is to become effective at a future date or upon the occurrence of a future event or contingency.

18

Copyright © 2011

MILITARY POWERS OF ATTORNEY CAN SPRING

A military power of attorney is valid if it is executed in accordance with

10 U.S.C. § 1044b. A deployment-contingent power of attorney may be signed in advance, is

effective upon the deployment of the principal and shall be afforded full force and effect by the courts of this state.

10 U.S.C. § 1044b reads as follows:

(a) Instruments to be given legal effect without regard to State law.--A military power of attorney—

(1) is exempt from any requirement of form, substance, formality, or recording that is provided for powers of attorney under the laws of a State; and

(2) shall be given the same legal effect as a power of attorney prepared and executed in accordance with the laws of the State concerned.

(b) Military power of attorney.--For purposes of this section, a military power of attorney is any general or special power of attorney that is notarized in accordance with section 1044a of this title or other applicable State or Federal law.

(c) Statement to be included.

(1) Under regulations prescribed by the Secretary concerned, each military power of attorney shall contain a statement that sets forth the provisions of subsection (a).

(2) Paragraph (1) shall not be construed to make inapplicable the provisions of subsection (a) to a military power of attorney that does not include a statement described in that paragraph.

(d) State defined.--In this section, the term “State” includes the District of Columbia, the Commonwealth of Puerto Rico, and a possession of the United States.

For the rule of sale of homestead property when someone serving in the military is missing, see page 37.

19

Copyright © 2011

SPRINGING POWERS OF ATTORNEYDISCUSSION CONTINUED

How about an escrowed power of attorney?

Can a “live” power of attorney be signed on or after October 1,

2011, but be entrusted to a lawyer or other professional with

instructions not to deliver it to the appointed agent unless or

until the principal is incapacitated or otherwise unavailable?

The new statute provides that a copy of a power of attorney is equal

to an original, “except as otherwise provided in the power of

attorney.”

It therefore appears that the Legislature intended that an original

“live” power of attorney could be held in escrow and only used when

the agent has received the original document, if the power of

attorney provides that the agent needs the original document to act.

20

Copyright © 2011

SPRINGING POWERS OF ATTORNEYDISCUSSION CONTINUED

As a result:

Many law firms will be preparing multiple power of attorneys,

and escrow agreements so that the client will sign four or five

identical powers of attorney, and one or more of these can be

delivered to the agent when the principal becomes

incapacitated or is otherwise unavailable. Alternately, clients may designate three or four people as agents and

require consent among them before an action is taken to better

safeguard the clients’ personal assets.

Revocable trust arrangements will become more popular

because revocable trusts can still have “springing

trusteeship.” Assets under a revocable trust can be handled by a trustee, and the

trusteeship would not change from the grantor to alternate trustee

except upon an event that would otherwise apply (i.e., the incapacity

or resignation of the grantor).

Nevertheless, be careful with revocable trust planning. See the next

slide for examples of assets that cannot or should not normally be

placed under a revocable trust.

21

Copyright © 2011

SPRINGING POWERS OF ATTORNEYDISCUSSION CONTINUED: REVOCABLE

TRUSTS Not all assets can be placed into a Revocable Trust. Life insurance needs to be owned by the insured person. § 222.14 to be creditor

protected.

Annuity contracts need to be owned by an individual. § 222.14 to be creditor protected.

IRAs and pension accounts cannot be placed in trust, but may be payable to a properly

drafted trust.

Section 1244 Stock—To qualify for ordinary loss on sale: must be issued to an individual,

not a trust.

26 U.S.C. § 1244

Homestead is probably safe from creditors in a Revocable Trust. One bankruptcy court in 2001 has ruled otherwise: In re Bosonetto, M.D. Florida, stated that

because a trust is not a natural person, Florida property owned by the trust is not covered by the homestead exemption.

However, several cases have chosen not to follow Bosonetto: In re Edwards, 356 B.R. 807, 810 (Bankr. M.D. Fla. 2006): “the great weight of the

relevant case law holds to the contrary.” In re Alexander, 346 B.R. 546, 551 (Bankr. M.D. Fla. 2006): “Bosonetto does not cite to

any Florida cases in support of its ruling nor does it account for the contrary holdings of several courts in the cases cited above. Further, it appears that subsequent cases have not followed the reasoning in Bosonetto.”

Engelke v. Estate of Engelke, 921 So. 2d 693 (Fla. 4th DCA 2004): “The grantor of the trust retained an ownership interest in the property since the trust was revocable. The trust, due to its revocable nature, was owned by a ‘natural person’ within the meaning of the Florida homestead exemption.”

Tenancy by the entirety (TBE) is better creditor protection than having assets held in a revocable trust.

Most joint revocable trusts will not qualify as TBE for creditor protection services.

22

Copyright © 2011

LEVELS OF CAPACITY

23

Copyright © 2011

NEW LAW: THIRD PERSONS – ACCEPTANCE

A third person must accept or reject a power of attorney within a reasonable time. 4 days, excluding Saturdays, Sundays, and legal holidays, are presumed to be a reasonable

time for a financial institution to accept or reject a power of attorney. For other third persons, reasonableness will depend on a case by case examination of

circumstances and the terms of the power of attorney.

Upon rejection, a third party must state in writing the reason for the rejection. A third person is not required to accept a power of attorney, if the third person:

Is not otherwise required to engage in the transaction with the principal under the same circumstances;

Has knowledge of the termination or suspension of the agent’s authority or of the power of attorney;

Does not receive an affidavit, English translation, or opinion of counsel under § 709.2119(4) from the agent, after a timely request by the third person;

Believes in good faith that the power of attorney is not valid or the agent does not have authority; or

Has knowledge of a report to adult protective services stating a good faith belief that the principal may be subject to physical or financial abuse by the agent or someone acting for or with the agent.

A third person who improperly refuses to accept a power of attorney is subject to: A court order mandating acceptance of the power of attorney; and Liability for damages, including reasonable attorney’s fees and costs, incurred in any action

or proceeding that confirms, for the purpose tendered, the validity of the power of attorney or mandates acceptance of the power of attorney.

Can only recover attorney’s fees incurred in the lawsuit filed to determine the validity of the power of attorney or one mandating acceptance of a power of attorney. 24

Copyright © 2011

NEW LAW: THIRD PERSONS – ACCEPTANCE

A third person who in good faith accepts a power of attorney that appears to be executed in the manner required by law at the time of its execution may rely upon the power of attorney and the actions of the agent which are reasonably within the scope of the agent’s authority and may enforce any obligation created by the actions of the agent as if:

The power of attorney were genuine, valid, and still in effect; The agent’s authority were genuine, valid, and still in effect; and The authority of the officer executing for or on behalf of a financial institution that has

trust powers and acting as agent is genuine, valid, and still in effect.

A third person does not have a power of attorney in good faith if the third person has notice that:

The power of attorney is void, invalid, or terminated; or The purported agent’s authority is void, invalid, suspended, or terminated.

A third person who is asked to accept a power of attorney that appears to be executed in accordance with § 709.2103 may in good faith request, and rely upon, without further investigation:

A verified English translation of the power of attorney An opinion of counsel as to any matter of law concerning the power of attorney, if that

third person provides in a writing or other record the reason for the request; or An affidavit (see page 26).

Third parties can act in reliance upon authorization granted to an agent and the instructions of the agent and will be held harmless by the principal from any loss suffered or liability incurred as a result of the actions taken before the receipt of notice provided in § 709.2121. 25

Copyright © 2011

NEW LAW: THIRD PERSONS - AFFIDAVITA third person may require an agent or an officer of a financial institution acting as an

agent to execute an affidavit which may be in the following form: (in § 709.2119)

STATE OF............

COUNTY OF............

Before me, the undersigned authority, personally appeared ...(attorney in fact)... (“Affiant”), who swore or affirmed that:

1. Affiant is the attorney in fact named in the Durable Power of Attorney executed by ...(principal)... (“Principal”) on ...(date)...

2. This Power of Attorney is currently exercisable by Affiant. The principal is domiciled in ...(insert name of state, territory, or foreign country)...

3. To the best of Affiant's knowledge after diligent search and inquiry:

a. The Principal is not deceased;

b. Affiant's authority has not been suspended by initiation of proceedings to determine incapacity or to appoint a guardian or a guardian advocate; and

c. There has been no revocation, or partial or complete termination, of the power of attorney or of Affiant's authority.

4. Affiant is acting within the scope of authority granted in the power of attorney.

5. Affiant is the successor to ...(insert name of predecessor agent)..., who has resigned, died, become incapacitated, is no longer qualified to serve, has declined to serve as agent, or is otherwise unable to act, if applicable.

6. Affiant agrees not to exercise any powers granted by the Durable Power of Attorney if Affiant attains knowledge that it has been revoked, has been partially or completely terminated or suspended, or is no longer valid because of the death or adjudication of incapacity of the Principal.

................

...(Affiant)...

Sworn to (or affirmed) and subscribed before me this ... day of ...(month)..., ...(year)..., by ...(name of person making statement)...

...(Signature of Notary Public-State of Florida)...

...(Print, Type, or Stamp Commissioned Name of Notary Public)...

Personally Known OR Produced Identification

...(Type of Identification Produced)...

26

Copyright © 2011

NEW LAW: AGENT – QUALIFICATIONS AND REQUIREMENTS

An agent must be either: A natural person who is 18 years of age or older; or A financial institution that has trust powers, has a place of

business in Florida, and is authorized to conduct trust business in Florida.

An agent may receive reimbursement of the expenses reasonably incurred on behalf of the principal.

Only a qualified agent is eligible for paid compensation.

A qualified agent must be one of: A spouse or heir of the principal; A financial institution that has trust powers and a place of

business in Florida; An attorney or certified public accountant licensed in Florida; or A natural person who is a resident of Florida and who has never

been an agent for more than three principals at the same time. What the heck does this mean?

27

Copyright © 2011

NEW LAW: AGENT - QUALIFICATIONS AND REQUIREMENTS

Co-agents: A principal may designate two or more persons to act as co-agents. Except as otherwise provided by the power of attorney, each co-agent may exercise its authority independently. One or more of the agents may delegate to a co-agent the

authority to conduct banking transactions as provided in §709.2208(1), whether or not this authority is specifically enumerated or incorporated by reference to that section in the power of attorney.

Successor Agents: A principal may also designate one or more successor agents to act if an agent resigns, dies, becomes incapacitated, is not qualified to serve, or declines to serve. Except as otherwise provided in the power of attorney, the

successor agent will have the same authority as the original agent.

The successor agent may not act until the predecessor agents have resigned, have died, have become incapacitated, are no longer qualified to serve, or have declined to serve.

28

Copyright © 2011

AVOIDING FINANCIAL SCAMS"Mr. Madoff has not only stolen my money,” wrote Richard Shapiro of Hidden Hills, Calif. "He has stolen my lifestyle and my family's Lifestyle. We as a result, are sentenced to a life devoid of our life savings and the security and comfort that provided to us."

“Madoff Victims Vent Their Anger in Print”, by Armen Keteyian, CBS News, Mar. 18, 2010

http://www.cbsnews.com/stories/2009/06/15/cbsnews_investigates/main5090670.shtml

“You never want to hear the words that come with such a phone call. "We are all wiped out." But they came, and we went numb.”

"I wouldn't invest a nickel in the stock market,” Stephanie Halio says. "It's too dangerous, and the government is not there to protect us. […] You live your life according to what you've saved," she says. "I don't want anyone else's money. I want my money returned to me." Little Relief for Madoff Victims

“Many former investors won't benefit even as a trustee found surprising success recovering funds lost in Bernard Madoff's $65 billion fraud”, by Ben Steverman, Bloomberg Businessweek, Jan. 11, 2011.

Consider a Clause like:

“My agent shall invest only in Federal Deposit Insurance Corporation insured bank accounts, CDs, and other accounts, brokerage accounts with major brokerage firms that are fully insured by Security Investor Protection Corporation, and with licensed trust companies duly bonded and operating in the United States, but may retain any asset owned by me at the time that the agent begins to serve.”

Any such account that is invested in anything other than CDs, cash, money market, or conservative, low cost bond funds must be opened and managed whereby the brokerage firm or other institution takes on the fiduciary obligation to make or approve investment decisions by or for the appointed agent.

No investments will be made in options, puts, margined accounts, or bonds or funds that invest in bonds below a AA rating with Standard & Poor’s, Mouton’s or their successors.”

29

Copyright © 2011

NEW LAW: AUTHORITY OF AGENTS – POWERS REQUIRING SEPARATE SIGNED ENUMERATION

For powers of attorney executed on or after October 1, 2011, certain powers must be separately acknowledged (by signature or initialing) by the principal, which are the authority to: Create an inter vivos trust (living trust): The terms of the trust

agreement may prevent amendment or termination by an agent under a power of attorney.

Amend, revoke, or terminate a trust created by or f/b/o the principal (if the trust instrument allows it)

Make a gift subject to § 709.2202(3); However, an agent who is not an ancestor, spouse, or descendant of the

principal may not give themselves or someone that they are legally obligated to support any interest in the principal’s property, whether by gift, right of survivorship, beneficiary designation, disclaimer, or otherwise, unless the power of appointment provides to the contrary.

Unless the power of attorney provides otherwise, § 709.2202(3) only authorizes the agent to make of up to $13,000 per year plus an equal amount if the principal is married, plus the right to split a gift return under 26 U.S.C. 2513, unless explicitly provided otherwise.

Language can be added to the power of attorney to authorize gifts in excess of the gift tax annual exclusion.

Create or change rights of survivorship Create or change a beneficiary designation Waive the principal’s rights to be a beneficiary of a joint and

survivor annuity, including a survivor benefit under a retirement plan

Disclaim property or powers of appointment

30

Copyright © 2011

FEDERAL TAX IMPLICATIONS OF AGENTS’ AUTHORITY TO MAKE GIFTS

Granting an agent the power to make taxable gifts under a power of attorney is not a taxable gift by the principal, so long as the power of attorney is revocable.

However, the principal is considered to have made a taxable gift when the agent exercises the gifting power.

The gift must be effectively “delivered” to the donee for it be considered as a completed gift. In most cases, this means that the property subject to the gift must actually be delivered to the donee, or to an agent of the donee.

It is not clear as to whether an agent has a “general power of appointment” with respect to property over which the power of attorney authorizes the agent to make taxable gifts to himself or herself, or to satisfy the agent’s obligations.

There does not appear to be a case directly on point. On one hand, a general power of appointment for federal tax purposes includes all powers

that are in substance and effect powers of appointment, regardless of the nomenclature used in creating the powers. Therefore, if power of attorney gives the agent the power to make gifts to himself, or to satisfy his debts, then the agent may have a general power of appointment, and such property would be included in his estate for federal estate tax purposes.

On the other hand, if the power of attorney creating the gifting power is revocable by the principal, then the agent’s power to make gifts to himself may be seen as a power exercisable only with the consent or joinder of the principal. Powers that are exercisable only with the consent or joinder of the principal do not create a general power of appointment.

In light of this uncertainty, it might be advisable to draft the power of attorney to limit the agent's power to make gifts if estate and gift taxes are a concern.

Do not have clients own life insurance on their children. If a power of attorney allows an agent to deal with any life insurance policies owned by the principal, and the principal owns a life insurance policy on the agent’s life, then the agent could be considered to have “incidents of ownership” over the policy, and the policy death benefit could be included in the agent’s gross estate.

This can be avoided by drafting the power of attorney to limit the agent's authority over the principal’s life insurance policies.

31

NEW LAW: AGENTS – MODIFIABLE DUTIES

The following duties apply unless modified or eliminated by the power of attorney:

Competency: act with care, competence, and diligence ordinarily exercised by agents in similar circumstances;

An agent who has accepted authority to make investment and/or financial decisions for the principal must comply with the Prudent Investment Rule.

Loyalty: act loyally for the sole benefit of the principal;

May allow actions that create a conflict of interest if for the benefit of other family members.

Impartiality: act so as to not create a conflict of interest that impairs the agent’s ability to act impartially in the principal’s best interest;

Cooperate with health-care providers authorized to make health care decisions for the principal.

32

Copyright © 2011

NEW LAW: AGENTS – MANDATORY DUTIESThe new law creates the following duties that cannot be waived or

eliminated under a present and future power of attorney:

Act within the scope of the authority granted in the power.

Act in good faith, not contrary to: The principal’s reasonable expectations actually known by the agent; and The principal’s best interest (except as provided with respect to the agent’s

authority to cooperate with a person who has authority to make health care decisions for the principal and estate planning matters).

Attempt to preserve the principal’s estate plan (if in principal’s best interest), including:

The value and nature of the principal’s property; The principal’s foreseeable obligations and need for maintenance; Minimization of taxes, including income, estate, inheritance, generation-

skipping transfer, and gift taxes; SEE A CPA OR TAX LAWYER Eligibility for a benefit, a program, or assistance under a statute or rule; and The principal’s personal history of making or joining in making gifts.

Liability: An agent who acts in good faith is not liable to any beneficiary of the principal’s estate plan for failure to preserve the plan.

Act personally—may not delegate authority to a third person Except an agent may delegate in regards to investment functions, see §

518.112 Delegation of investment functions.

33

Copyright © 2011

Keep adequate records of all receipts, disbursements, and transactions made on behalf of the principal

Create and maintain an accurate and current inventory of the principal’s safe deposit box (if authorized to access)

No obligation to disclose receipts, disbursements, or transactions or safe deposit box inventories unless ordered by court or requested by the principal, a court-appointed guardian, or another fiduciary acting for the principal, a court agency, or (after death) a personal representative or successor in interest to principal’s estate.

Must comply within 60 days of an authorized request or provide written or other records substantiating why additional time is needed.

NEW LAW: AGENTS – MANDATORY DUTIES

34

Copyright © 2011

A POWER OF ATTORNEY AGENT LOG

DATE ACTION COST THIRD PARTIES

INVOLVED

REASON/RESULT

FOLLOW-UP

NEEDED

10/4/2011 Paid the veterinarian

$57.42 checking

Vet Bird had a cough & is better

Give bird its medication

10/8/2011 Paid the veterinarian

$57.42checking

Vet Bird has lisp

Needs voice lessons

10/10/2011 See Mrs. Jones’, lawyer*

$300.00checking

Mrs. Jones Review prior actions

See again in 3 months

10/12/2011 Garage Sale Deposited $624.00

Paid Cash Sold Furnishings

Not applicable

*Hard to understand – will ask the vet to explain.

Please note exoneration on page 42: The power of attorney may provide that the Agent is not liable for any acts or decisions made in good faith, except to the extent resulting from dishonesty, improper motive, or reckless indifference to the purposes of the power of attorney, or the best interests of the principal.

35

Copyright © 2011

AGENTS – ACCEPTANCE OF POWERS AND RESPONSIBILITIES

The method of acceptance is to be determined in accordance with the criteria set forth in the power of appointment. If no criteria is specified, a person or financial institution

accepts appointment as an agent by: Exercising authority or performing duties as an agent; or Any other assertion or conduct indicating acceptance.

Acceptance is limited to those aspects of the power of attorney for which the agent’s assertions or conduct reasonably manifests acceptance.

36

Copyright © 2011

AUTHORITY OF AGENTS An agent may only exercise authority specifically granted to the agent in the power of attorney

and any authority reasonably necessary to give effect to that express grant of specific authority. There can no longer be incorporation by reference to a statutory list of powers because the new

statute does not provide a laundry list of powers as the old statute did. Therefore, it is important to specifically list the powers intended to be granted.

Such authorization may include, without limitation, authority to: Execute stock powers or similar documents on behalf of the principal and delegate to a

transfer agent or similar person the authority to register any stocks, bonds, or other securities into or out of the principal’s or nominee’s name.

Convey or mortgage homestead property. However, if the principal is married, the agent may not mortgage or convey homestead

property without joinder of the principal’s spouse or the spouse’s guardian. Joinder by a spouse may be accomplished by the exercise of authority in a power of attorney executed by the joining spouse, and either spouse may appoint the other as his or her agent.

Make all health care decisions on behalf of the principal, if such authority is specifically granted in a durable power of attorney

Authority with respect to property: Authority granted in a power of attorney is exercisable with respect to property that the

principal has when the power of attorney is executed and to property that the principal acquires later

Whether or not the property is located in Florida and; Whether or not the authority is exercised or the power of attorney is executed in Florida.

Authority to convey homestead property under military power of attorney: Cannot convey homestead property until 1 year after the first official report or listing of the

principal as missing or missing in action. Requires an affidavit of an officer of the Armed Forces having maintenance and control of the

records pertaining to those missing or missing in action that the principal has been in that status for a given period, which is a conclusive presumption of the fact.

Better to have a bona fide Florida durable power of attorney so that the military statute will not apply.

37

Copyright © 2011

AUTHORITY OF AGENTS

Prohibited Actions An agent may not:

Perform duties under a contract that requires exercise of personal services of the principal;

Make any affidavit as to the personal knowledge of the principal; Vote in any public election on behalf of the principal; Execute or revoke any will or codicil for the principal; or Exercise powers and authority granted to the principal as trustee or as court-

appointed fiduciary. A provision is invalid if:

It authorizes an agent to engage in a transaction affected by conflict of interest or as the result of abuse of a fiduciary or confidential relationship.

Banks and Other Financial Institutions An Agent has general authority to engage in the following transactions if

the power of attorney includes a statement that the agent has authority to conduct:

Banking transactions as provided in § 709.2208(1), Florida Statutes, grants general authority to engage in a list of financial transactions.

Investment transactions as provided in § 709.2208(2), Florida Statutes, grants authority to engage in actions with respect to securities.

Financial institution defined: a state or federal savings or thrift association, bank, savings bank, trust company, international bank agency, international banking corporation, international branch, international representative office, international administrative office, international trust company representative office, credit union, or an agreement corporation operating pursuant to s. 25 of the Federal Reserve Act, 12 U.S.C. ss. 601 et seq. or Edge Act corporation organized pursuant to s. 25(a) of the Federal Reserve Act, 12 U.S.C. ss. 611 et seq.

38

Copyright © 2011

FLORIDA STATUTE SECTION 709.2208(1) AND (2)709.2208 Banks and other financial institutions.—

(1) A power of attorney that includes the statement that the agent has “authority to conduct banking transactions as provided in section 709.2208(1), Florida Statutes” grants general authority to the agent to engage in the following transactions with financial institutions without additional specific enumeration in the power of attorney:

(a) Establish, continue, modify, or terminate an account or other banking

arrangement with a financial institution;

(b) Contract for services available from a financial institution, including renting a safe deposit box or space in a vault;

(c) Withdraw, by check, order, electronic funds transfer, or otherwise, money or property of the principal deposited with or left in the custody of a financial institution;

(d) Receive statements of accounts, vouchers, notices, and similar documents

from a financial institution and act with respect to them;

(e) Purchase cashiers checks, official checks, counter checks, bank drafts, money orders and similar instruments:

(f) Endorse and negotiate checks, cashiers checks, official checks, drafts, and other negotiable paper of the principal or payable to the principal or the principal’s order, transfer money, receive the cash or other proceeds of those transactions, and accept a draft dawn by a person upon the principal and pay it when due:

(g) Apply for, receive, and use debit cards, electronic transaction authorizations, and traveler’s checks from a financial institution;

(h) Use, charge, or draw upon any line of credit, credit card, or other credit established by the principal with a financial institution; and

(i) Consent to an extension of the time of payment with respect to commercial paper or a financial transaction with a financial institution. 39

Copyright © 2011

FLORIDA STATUTE SECTION 709.2208(1) AND (2)709.2208 Banks and other financial institutions.—

(2) A power of attorney that specifically includes the statement that the agent has “authority to conduct investment transactions as provided in section 709.2208(2), Florida Statutes” grants general authority to the agent with respect to securities held by financial institutions to take the following actions without additional specific enumeration in the power of attorney:

(a) Buy, sell, and exchange investment instruments;

(b) Establish, continue, modify, or terminate an account with respect to investment instruments;

(c) Pledge investment instruments as security to borrow, pay, renew, or extend the time of payment of

a debt of the principal;

(d) Receive certificates and other evidences of ownership with respect to investment instruments;

(e) Exercise voting rights with respect to investment instruments in person or by proxy, enter into voting trusts, and consent to limitations on the right to vote; and

(f) Sell commodity futures contracts and call and put options on stocks and stock indexes. (Not

“investment instruments”).

“Investment Instruments” are defined as stocks, bonds, mutual funds, and all other types of securities and financial instruments, whether held directly, indirectly, or in any other manner, including, but not limited to:

Shares or interests in a private investment fund, including, but not limited to:A private investment fund organized as a limited partnership, a limited liability company, a statutory or common law business trust, a statutory trust, or a real estate investment trust, a joint venture, or any other general or limited partnership;

Derivatives or other interests of any nature in securities such as: Options, options on future, and variable forward contracts; Mutual funds; common trust funds; money market funds; hedge funds; private equity or venture capital funds; insurance contracts; andOther entities or vehicles investing in securities or interest in securities whether registered or otherwise, except commodity futures contracts and call and put options on stocks and stock indexes.

40

Copyright © 2011

LIABILITY OF AGENTS

Actions of agents occurring before Oct. 1, 2011 are not affected by the new law.

An agent who violates his or her duties is liable to the principal or the principal’s successors in interest for the amount required to: Restore the value of the principal’s property to what it would have been

had the violation not occurred; and Reimburse the principal or the principal’s successors in interest for the

attorney’s fees and costs paid from the principal’s funds on the agent’s behalf in defense of the agent’s actions.

Actions of Co-Agents: An agent is not liable for actions or omissions of another agent if the

agent does not participate in or conceal a fiduciary duty committed by the other agent.

An agent who has actual knowledge of a breach or imminent breach of fiduciary duty by another agent, including a predecessor agent, must take any action reasonably appropriate in the circumstances to safeguard the principal’s best interests.

If the agent in good faith believes that the principal is not incapacitated, giving notice to the principal is sufficient.

An agent who fails to take action as required is liable to the principal for the principal’s reasonably foreseeable damages that could have been avoided if the agent had taken such action.

A successor agent does not have the duty to review the conduct or decisions or the predecessor agent.

The remedies under this Act are not exclusive and do not abrogate any right or remedy under any other law other than the Act.

41

Copyright © 2011

LIABILITY OF AGENTS

Successor Agents do not have a duty to: Review the conduct or decisions of a predecessor agent. Institute any proceeding against a predecessor agent, or to file any claim

against a predecessor agent’s estate, for any of the predecessor agent’s actions or omissions as agent (except as discussed in the preceding section).

Others An agent may delegate investment functions under Florida’s Prudent

Investment Rule. As long as the agent exercises reasonable care, judgment, and caution

in selecting the individual, the delegating agent is not liable for an act, error or judgment, or default of the delegated individual.

The agent must also take reasonable care in regards to the scope of the delegated authority and must periodically review the actions of the delegated individual.

Exoneration A power of attorney may provide that an agent is not liable for any acts

or decisions made by the agent in good faith and under the power of attorney, except to the extent the power of attorney:

Relieves the agent of liability for breach of a duty committed: Dishonestly; With improper motive; or With reckless indifference to the purposes of the power of attorney

or the best interest of the principal; or Was inserted as a result of an abuse of a confidential or fiduciary

relationship with the principal.42

Copyright © 2011

NAMEADDRESSADDRESS

Dear ___________:

The Florida legislature passed a new durable power of attorney act that will take effect October 1, 2011.

Most Floridians probably do not need to do anything in response to this new law, but there will doubtlessly be a significant amount of press given to this issue in a few weeks, and a few clients will want to take one of the actions described below.

This act will not affect the legal authority or primary rules associated with your presently effective Powers of Attorney, but beginning October 1, 2011, banks and other financial institutions are probably going to be much more cautious about acting on Powers of Attorney. It may be a good idea to refresh your power of attorney in the not too distant future, because the age of a document can influence whether it will be readily acceptable by third parties in times of need.

You may also want to review who you gave your power of attorney to, and who the alternates are.

A small number of our clients have executed springing powers of attorney, that by their terms would not take effect unless or until the incapacity of the client. Springing powers of attorney will not be permitted in Florida if signed after September 30, 2011. If you would like for your financial power of attorney to not apply unless or until you are incapacitated, then it may be best for you to sign a springing power of attorney before October 1st of this year.

43

Copyright © 2011

If you presently have a springing power of attorney, then it would not be a bad idea to sign an updated version of it before October 1st, so that it is as “recent as possible” and would therefore not be replaceable.

Also, healthcare powers of attorney that “spring” will require affidavits from a medical physician or osteopath before they are effective after the incapacity of the person who has given the power.

After September 30th, some clients will have us use escrowed powers of attorney, whereby our firm or another trusted professional or personally chosen entity would hold a “live” power of attorney in escrow, with instructions and consent to deliver it for use if and when you would ever be unable to act for yourself, whether this will be upon incapacity or for other good reason.

Once the new law takes effect, it will not be safe to use any sort of standard form durable power of attorney that you might find in an office supply store, on the internet, or even in reputable form books. The new Florida statute requires that certain important powers be enumerated next to where you would initial or separately sign your name for each power.

The new law will also require post-September 30, 2011 powers of attorney to have two witnesses, and to be notarized.

The Florida healthcare power of attorney law was not changed by this new act. Nevertheless, this may be a good time to review who you have appointed, and who your alternates are for the exercise of healthcare power authority, keeping in mind that the agent under your financial power of attorney, or an alternate Trustee under any trust you may have established for yourself, will need to be available to provide financial payment and other fiscal-related duties if you or a loved one were to become incapacitated.

Many clients have adult children who give them financial and healthcare powers of attorney in order to be able to sign a child’s name, or to make decisions for a child as a matter of convenience or in the event of incapacity.

We very much appreciate the opportunity to be of service with respect to your planning. Please let me know if you have any questions on the above, and feel free to fill out the following form if any of the below indicated boxes apply to you.

44

Copyright © 2011

From: Joe Client

Address: XYZ

To: Gassman Law Associates, P.A.(FAX: 727 443 5829)(EMAIL: AGASSMAN@GASSMANPA.COM)(WRITE: 1245 COURT STREET, STE. 102, CLEARWATER, FL 33756)(PHONE: 727 442 1200 and tell the receptionist)

With reference to your power of attorney letter, please:

___ Send me copies of our present powers of attorney so that we can see if they should be updated.

___ Please also send me copies of the decision pages from our will and trust documents on the appointment of Personal Representatives and Trustees so that we can review those.

___ I know it has been a long time—please send me an updated power of attorney with the same first choice and alternatives as I had before, so that I can review these to

see if we should change them while having them updated.

___ Please call me to discuss this.

___ Please provide me with a springing power of attorney, appointing ___________ to serve as my agent in the event of my incapacity, and with _________________ as alternate agent(s).

___ Please send information on the new $5,000,000 estate tax exemption, and what my planning opportunities may be for this.

___ Please send this by email only in order to save paper.

___ Please recommend a veterinarian for my bird’s lisp.

45

Copyright © 2011

JUDGE ST. ARNOLD’S THOUGHTS ON THE NEW LAW AND ITS EFFECTS IN THE

CONTEXT OF LITIGATION AND JUDICIAL INTERPRETATION

46

Copyright © 2011

QUESTIONS?

Alan S. Gassman, Esq.agassman@gassmanpa.com(727) 442-1200

47

Copyright © 2011

ABOUT THE SPEAKERSJUDGE JACK R. ST. ARNOLD

Judge St. Arnold, who currently presides in the probate division in the Sixth Judicial Circuit of Florida. He is a native of Pinellas County who graduated from Hamline University Law School in Minnesota. He began his legal career in 1977 with the firm of Peebles & Gracy in Dunedin, and in 1987, he and attorney Jim Stearns started their own firm, a practice that concentrated on civil litigation, estate planning and probate.

Before becoming a judge, St. Arnold a pilot, was a volunteer who flew to Caphaitian twice a year carrying food and medicine for the charitable organization, For Haiti With Love.

48

Copyright © 2011

ABOUT THE SPEAKERSALAN S. GASSMAN, ESQ.

Alan S. Gassman is an attorney practicing in Clearwater, Florida with the firm of Gassman Law Associates, P.A. Mr. Gassman’s primary practice focus over the past 26 years has been the representation of high net worth individuals, physicians and business owners in estate planning, taxation, and business and personal asset structuring. Mr. Gassman speaks often for national and state sponsored continuing education programs and publishes several articles each year in publications such as such as BNA, Estates and Trusts Magazine, Estate Planning Magazine, The Florida Bar Journal, Leimberg Estate Planning Network (LISI), and Medical Economics, and has presented dozens of Webinars for professionals on a variety of topics.

Mr. Gassman has a law degree and a Masters of Law degree (LL.M.) in Taxation from the University of Florida, and a business degree from Rollins College. He is board certified by the Florida Bar Association in Estate Planning and Trust Law, has the Accredited Estate Planner designation for the National Association of Estate Planners & Councils, has been and is a commentator for the Leimberg LISI Estate Planning Network, past President of the Pinellas County Estate Planning Council, and co-chair and lecturer for two annual Florida Bar Tax Section conferences (Wealth Conservation and Physician Representation). Mr. Gassman holds a prestigious AV rating from his peers on the Martindale-Hubbell attorney listing.

Mr. Gassman can be contacted at agassman@gassmanpa.com, or by phone at 727-442-1200. The Gassman Law Associates, P.A. website is www.gassmanlaw.com.

49

Copyright © 2011

ABOUT THE SPEAKERSCHRISTOPHER J. DENICOLO, ESQ.

Christopher J. Denicolo, J.D., LL.M. is a partner at the Clearwater, Florida law firm of Gassman Law Associates, P.A., where he practices in the areas of estate tax and trust planning, taxation, physician representation, and corporate and business law.

He is the author of several noted articles in The Florida Bar Journal, BNA Tax & Accounting, Estate Planning Magazine and Leimberg Information Services, Inc. He, Alan Gassman and Kenneth Crotty are the co-authors of the BNA book Estate Tax Planning in 2011 & 2012.

His e-mail address is christopher@gassmanpa.com.g/gassman/seminars/webinar – power of attorney/FL New POA Act.1p.pptx

50

Copyright © 2011