Iowa recently enacted the Iowa Uniform Power of Attorney Act, which became effective on July 1, 2014 and is a complete revision to the law regarding durable financial powers of attorney. The new law establishes a comprehensive legal structure for the creation and use of a power of attorney.
A durable financial power of attorney is an instrument in which you designate another person to act on your behalf and allows another to make decisions about your financial affairs.
A financial power of attorney is “durable” in the sense that it survives incapacity. If you become unable to manage your own financial affairs, your agent can use the power of attorney to pay your bills, manage investments, and prevent the waste of assets.
A power of attorney is a tool to ensure continuity in your affairs if you aren’t to do so. The instrument isn’t subject to Court approval, and can only be challenged under limited circumstances.
An individual can use a durable power of attorney to plan for potential incapacity. If you don’t have a power of attorney, then a court may appoint a conservator to make your financial decisions if you become disabled or incapacitated. Conservatorships can be costly and time-consuming, and can be avoided with proper planning.
The new law contains several significant provisions. The law uses the term “agent” instead of the term “attorney-in-fact”, which can be confusing for some clients. The new statute requires express authorization for the agent’s exercise of certain powers, such as making gifts of the principal’s money.
The agent’s fiduciary duties are clearly delineated. These include admonitions to act in good faith and to act within the scope of the document. It also includes an example of the proper form for signing on behalf of the principal. Another key element is the reminder that the power of attorney expires upon the death of the principal.
The law requires that most third parties, such as banks, accept a valid financial power of attorney. In return, those entities have protection from liability for reliance on the power of attorney.
A durable financial power of attorney is a crucial tool that allows you to designate your financial agent, providing a smooth transition in case of disability and preserving your assets.
Information provided by Ross Barnett, attorney for Abendroth and Russell Law Firm, 2560 73rd St., Urbandale, 278-0623, www.ARPCLaw.com.