Arizona Powers of Attorney Must Meet New Requirements

AUGUST 24, 1998 VOLUME 6, NUMBER 8

This month, two new laws governing powers of attorney became effective in Arizona. While the changes will not have much effect on existing powers of attorney, they may make new documents invalid, particularly when computerized forms (or forms prepared by lawyers who have not kept abreast of the changes) are used.

The Arizona legislature has for several years been concerned that the state’s aging population is susceptible to exploitation by unscrupulous care home operators, financial advisers, friends and family members. In each of the past several years, the legislators have considered (and frequently adopted) changes to the law governing durable powers of attorney, hoping to reign in the abuses. Unfortunately, those who rely on powers of attorney to accomplish legitimate purposes (such as the appropriate management of a now-incapacitated family member’s finances) are also affected by the changes.

The new laws make it clear that a durable power of attorney may be used only for the benefit of the person giving the power. In other words, the agent under a power of attorney is prohibited from making gifts to family members or paying for the support of adult children. If the agent ignores this rule, he will be guilty of theft.

If a person truly wishes to give the power to make such payments to an agent, she must separately initial those provisions of the power of attorney, as must the witnesses to her signature. The same provisions apply to anyone who charges a fee or commission to act as an agent; the power of attorney itself must include authority for the payments, and be separately initialed by the principal.

The other change adopted by the legislature will require all financial powers of attorney to be notarized and witnessed. The person signing the power of attorney and the witness must both declare that the principal is competent and not acting under duress. Failure to follow the language of the statute will make the power of attorney invalid.

The new requirements for execution of powers of attorney do not affect documents signed before August 1, 1998. Neither change will invalidate powers of attorney executed in other states, but the agent named in another state’s power of attorney is likely to be limited.

Should everyone who has already signed a financial power of attorney immediately sign a new document to comply with the changes in the law? Not necessarily, though the changes may be a good excuse for reviewing existing documents anyway. Over time, banks and others will come to expect the new language in powers of attorney, and it may be safer to update the documents every few years. The changes do not have any effect on existing health care powers of attorney, which are usually executed as separate documents.

One troubling effect of the new law will be that thousands of Arizonans are likely to execute invalid documents if they rely on bookstore forms, computer programs or other self-help sources for their powers of attorney. While it is unlikely that the legislature intended to increase the need to rely on lawyers for these instruments, that is the probably result of the new law, at least for the next several years (until forms providers and software manufacturers catch up with the Arizona legislature).

While a cynical observer might observe that the legislative changes were more show than substance, the new laws also include some good news for vulnerable seniors. The legislature included an appropriation of nearly $700,000 to fund an additional four adult protective services workers (statewide), operate a 24-hour adult abuse hotline program, provide after-hours shelter, emergency evaluations and caretaker services and train adult protective services workers in implementation of the new laws.

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