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"The West Virginia Uniform Power of Attorney Act: What Your Bank Needs to Know"
Effective June 10, 2012, the West Virginia Legislature adopted the Uniform Power of Attorney Act (the “Act”). The Act is a comprehensive overhaul of the state laws on powers of attorney that will have wide reaching implications (including potential liability) for the way financial institutions handle powers of attorney.
Until the Act was passed, there was a genuine lack of guidance in state law on what constituted a valid power of attorney, how long it was to last, and what an agent could or could not do on behalf of the principal. These issues presented real problems for banks which are often asked to rely on a power of attorney in financial transactions involving their customers. The Act eliminates much of the uncertainty in relying on powers of attorney because the Act addresses those issues directly.
Although much of the Act simply codifies prior state law, the Act includes some important changes that banks should be aware of. One of the most significant changes is that powers of attorney are now presumed to be durable, meaning that the power of attorney survives the principal becoming incompetent, unless it expressly states otherwise. Under prior law, the opposite was true, and banks should be aware that when a power of attorney is presented to them, the presumption is that it is durable. Another significant change relates to springing powers of attorney. Many banks are familiar with powers of attorney that contain language that provides the power of attorney “springs” into effect upon a certain event, generally the inability of the principal to act for himself or herself. Traditionally, banks have been reluctant to accept springing powers of attorney without proof that the principal was incompetent. The Act now provides guidance on when those springing powers of attorney take effect and banks may decide to reassess their approach to springing powers of attorney in light of this change.
Another significant change is the power that co-agents have together. Under prior law, co-agents were generally required to act unanimously unless the power of attorney stated otherwise. The Act changes this requirement so that co-agents are free to act independently and third parties, such as banks, can rely on the action of one of the co-agents, unless the document states differently. Other changes involving agents include granting agents the power to delegate authority to third-parties and to collect compensation for their services to the principal.
The Act also enumerates the powers granted to an agent under a power of attorney. Many of those powers are similar to what banks are accustomed to seeing in powers of attorneys drafted by local attorneys skilled in this practice area. They include powers related to managing, selling, leasing, and lending real and personal property, depository accounts, insurance, litigation claims, retirement plans, taxes and the like.
The Act also provides a Statutory Power of Attorney Form, which can be used as a power of attorney document. It is important to note that a power of attorney can still be valid even if the statutory form is not used (the Act specifies what makes a valid power of attorney). The form is provided as a model or guideline. It also provides for a statutory form for an agent’s certification that the document is valid. Similar to the affidavit traditionally used to prove that a power of attorney was still valid, the agent’s certification can be requested by a bank when it needs further reassurances that the power of attorney is valid and in effect.
Although the Act clarifies the use and effect of powers of attorney in banking transactions, it also creates potential liability for banks.. Specifically, the Act provides a certain time period in which a bank must either accept a power of attorney, demand an agent certification or deny the power of attorney. When a denial is found to be wrongful (or when delay exceeds the prescribed time allotment), then a bank may be subject to liability for its actions (or inactions). To avoid liability, banks should take steps to educate their employees about the specific time periods set forth in the Act.