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  1. 1. HCUL TECHNICAL DATE PAGE ADVISORY GUIDE 9/29/06 IIIC 1 POWER OF ATTORNEY OVERVIEW Credit unions are sometimes asked to honor a Power of Attorney (POA) and it can be intimidating for an employee who does not know or understand what a Power of Attorney is. Even for an employee who is familiar with POAs, it can be intimidating because there is no “standard” POA document, and a POA may be ten years old and still be valid. Power of Attorney is a term given to a document where an individual (the “principal”) appoints another individual (the “attorney-in-fact” or “agent”) to act on the principal’s behalf. Powers of attorney can be very specific or very broad. For example, a mother may have a POA allowing her daughter to write checks on her account while she’s traveling. Or the mother could have a POA that allows her daughter to do anything on her behalf. Not all POAs are alike. A POA may be effective immediately, it may be effective from a certain date, or only if a certain event takes place. It is important to read the POA very carefully to understand what the attorney-in-fact is authorized to do. There is no law that says a credit union has to accept a POA. If a credit union has doubts about the validity of a POA, it could: • Refer the POA to the designated POA “expert” at the credit union; • Ask an attorney to review the POA; • Ask the attorney-in-fact to sign an affidavit that the POA has not been revoked or terminated by the principal’s incapacity or death; or • Not accept the POA If you don’t feel comfortable accepting the POA, do not feel pressured to do so.
  2. 2. HCUL TECHNICAL DATE PAGE ADVISORY GUIDE 9/29/06 IIIC 2 POWER OF ATTORNEY I. REQUIREMENTS FOR A VALID POWER OF ATTORNEY The POA document should be: • In writing; • Signed and dated by the principal; and • Preferably notarized Hawaii law does not require a POA to be notarized but if it is notarized you are ensured it is the signature of the principal and it solidifies the validity of the document. If a POA is used to transfer real property, HRS 502-84 requires the POA to be recorded with the State Bureau of Conveyances and in this case, the POA has to be notarized. II. DURATION OF A POWER OF ATTORNEY A POA remains in effect until: • It is revoked by the principal; • The principal becomes mentally incompetent; or • The principal dies Only a durable POA can remain in effect even if the principal becomes incompetent or incapacitated. The term durable means the POA is designed to remain in effect in such instances. So for a durable POA, it remains in effect until it is revoked by the principal or the principal dies. Although a POA terminates upon the death or mental incompetency of the principal, Hawaii Revised Statutes (HRS) 551D-4 says that the POA does not terminate if the attorney-in-fact did not know of the death or mental incompetency of the principal and acted in good faith. If the credit union is not sure whether the POA has been revoked, if the principal has died, or if the principal is mentally incompetent, the credit union can ask the attorney-in-fact to sign an affidavit stating
  3. 3. HCUL TECHNICAL DATE PAGE ADVISORY GUIDE 9/29/06 IIIC 3 POWER OF ATTORNEY that the POA has not been revoked or terminated by the principal’s incapacity or death. Ashford and Wriston, the league’s counsel, developed an Affidavit of Attorney-In-Fact that credit unions may use. III. TYPES OF POWER OF ATTORNEY There are various types of powers of attorney. The following are those usually presented to a credit union: A. General Power of Attorney A general POA is very broad and provides extensive powers to the attorney-in-fact. A general POA usually includes the following powers: • Handling banking transactions • Entering safe deposit boxes • Handling transactions involving U.S. securities • Buying and selling property • Purchasing life insurance • Settling claims • Entering into contracts • Exercising stock rights • Buying, managing, or selling real estate • Filing tax returns • Handling matters relating to government benefits A general POA is frequently included as part of an estate plan, ensuring that the member is covered in case he cannot handle his personal affairs. B. Limited or Special Power of Attorney A limited or special POA gives specific or special powers to the attorney-in-fact. For example, the member may appoint someone to sell a house or a car for him. Or the member may allow his son to
  4. 4. HCUL TECHNICAL DATE PAGE ADVISORY GUIDE 9/29/06 IIIC 4 POWER OF ATTORNEY write checks for two months while he’s traveling out of the country. The POA should state specifically what the attorney-in-fact is allowed to do. Look for account numbers or beginning and end dates. C. Springing Power of Attorney A springing POA is used to plan for a principal’s future incapacity or disability and becomes effective upon an event happening, such as an accident or Alzheimer’s. D. Durable Power of Attorney A durable POA is a general or special POA that contains durability provisions. If the member becomes mentally incompetent while a POA is in effect, a durability provision allows the POA to remain in effect. HRS 551D-1 says a durable POA must contain the words: • “This power of attorney shall not be affected by the disability of the principal”; • “This power of attorney shall become effective upon the disability or incapacity of the principal”; or • similar words showing the intent of the principal that the authority conferred shall be exercisable notwithstanding the principal’s subsequent disability or incapacity A Durable POA is effective until it is revoked by the principal or until the principal’s death. There are some Durable POAs that do not go into effect until the principal becomes mentally incompetent because of illness or an accident. The POA should specify that it doesn’t go into effect until a doctor certifies that the principal is mentally incapacitated.
  5. 5. HCUL TECHNICAL DATE PAGE ADVISORY GUIDE 9/29/06 IIIC 5 POWER OF ATTORNEY IV. AGENT’S (ATTORNEY-IN-FACT’S) OBLIGATION TO PRINCIPAL An agent should act in the best interests of the principal. There is no government agency that monitors agents in a POA situation. Generally, an agent is only held responsible for misconduct that is intentional, not for unknowingly doing something wrong. This protection is included in most POA documents to help encourage people and organizations to accept the responsibility of being an agent. Usually there is no financial incentive to serve as an agent, most serve without compensation. Because POA powers are sometimes abused, a principal should only appoint an agent he can trust. V. OUT-OF-STATE POA If a POA drawn up out-of-state is presented, the same precautions should be taken as one drawn up in Hawaii. A good idea would be to require that it be notarized. Also, the attorney-in-fact should be required to complete the Affidavit of Attorney-In-Fact. VI. HOW TO SIGN AS ATTORNEY-IN-FACT When signing for the principal, the attorney-in-fact should sign: • Jane Smith, by Michael Smith, as her attorney-in- fact; or • Michael Smith, attorney-in-fact for Jane Smith
  6. 6. HCUL TECHNICAL DATE PAGE ADVISORY GUIDE 3/8/07 IIIC 6 POWER OF ATTORNEY VII. REVOKING A POA Can a POA be revoked? John Lockwood, attorney with Ashford & Wriston, says except in exceedingly unusual circumstances, a POA can be revoked. Be aware of the following: A. The revocation should be in writing (although an oral revocation is effective) B. If the POA is recorded (i.e., at the Bureau of Conveyances) then the revocation has to be recorded C. The principal has to give notice (preferably in writing) to all the third parties with whom the attorney-in-fact is apt to do business (i.e., financial institutions) D. If the credit union has been notified by the member orally or in writing (informally or formally) that the POA has been revoked, the credit union should consider it revoked and have the revocation confirmed in writing. The written revocation should include appropriate reference to: • The power of attorney; • The attorney-in-fact; and • The fact that it has been revoked E. If you accept the revocation, notify everyone in the credit union so the attorney-in-fact is not allowed to conduct transactions F. The HRS does not specifically address how to revoke a POA. If you are unsure, contact your attorney.
  7. 7. HCUL TECHNICAL DATE PAGE ADVISORY GUIDE 3/8/07 IIIC 7 POWER OF ATTORNEY VIII. CHECK LIST The following is a simple check list that may help when you are asked to honor a POA: • Is the POA in writing, signed, dated, and notarized? • What type of POA is it? Is it a general or limited POA or is it durable? • Does the POA contain specific powers or dates? • Do certain events have to take place before the POA becomes effective? • What does the attorney-in-fact want to do? Does the POA allow him to do it? • Be sure the POA does not contain termination language. For example, some POA’s terminate upon the occurrence of an event, such as a divorce. • If the credit union is aware that the member is deceased, do not honor the POA. • If the credit union is aware that the member is incapacitated, the POA should be a durable POA. • Have the attorney-in-fact sign an affidavit that the POA has not been revoked or terminated. • Compare the member’s signature on the POA with your account card. • Call the member and ask if the POA is still in effect. • Don’t be afraid to ask questions of the attorney- in-fact. • It is okay to tell the attorney-in-fact that you will have an attorney review the POA. • If you don’t feel comfortable about accepting the POA, don’t accept it. • If you accept the POA, ask the attorney-in-fact for identification. • If you accept the POA, remember to make a copy and keep it in the member’s file (along with records of the transaction).