Wednesday, June 28, 2023
Raymond C O’Brien (Catholic University of America- Columbus School of Law) recently published an Artcile, Creating a Trust Through Delegation, Quinnipiac Probate Law Journal, Vol. 36 Pp. 1-40, 2023. Provided below is an abstract:
Aging in America has precipitated increasing use of planning for incapacity devices, which include forms creating powers of attorneys (“POAs”). Simple forms may be found online, or they may become part of a sophisticated estate planning portfolio drafted by professionals. Resultingly, to support portability, enforceability, and protection against financial exploitation of vulnerable adults, the National Conference of Commissioners on Uniform State Laws approved the Uniform Power of Attorney Act in 2006 (“UPOAA”), which has been adopted by more than half of United States jurisdictions. One of the Act’s provisions requires an express grant of authority contained within the principal’s POA before an agent designated by the principal may create, amend, revoke, or terminate a trust. As a result, a general grant of authority to an agent is insufficient to permit an agent to create an inter vivos trust, revocable or irrevocable. This component is counterproductive because it lessens the agent’s fiduciary effectiveness, particularly given the flexibility and management advantages that trusts bring to modern estate planning. The rationale for requiring express authorization is that it protects the principal from possible financial exploitation by the agent, a serious and prevalent form of abuse adversely affecting many older Americans. And yet, states and the federal government have enacted various legislative protections, such as mandatory reporting, immunity for reporting, withholding funds when there is reasonable suspicion of financial abuse, increased statutory avenues for elder financial abuse prosecutions, and educational programs for financial officers and enforcement agencies. In addition, there are fiduciary restraints incorporated into the UPOAA and current trust law enacted in all states. With these advancements, it is far more likely today that financial exploitation by agents will be identified and perpetrators punished. This Article argues that provisions in POA statutes, specifically the UPOAA, requiring an express grant of authority before an agent may create an inter vivos trust is violative of public policy and statutes should be amended to permit agents to create, amend, revoke, or terminate a trust under a general grant of authority. The public policy argument is based on the abundant use of inter vivos trusts, the acceleration of reporting and prosecution of reasonable suspicions of financial exploitation, and the unawareness of a significant number of signers of POAs that a general grant of authority will not authorize their agents to take advantage of the substantial benefits associated with trusts and estate planning.