Agricultural Law for Iowa and Missouri

The Iowa Legislature recently enacted the Iowa Uniform Power of Attorney Act (IUPAA). The Act became effective law on July 1, 2014 and codified in the Iowa Code under Section 633B. The IUPAA greatly expands the state law governing the use of powers of attorney. A primary purpose for the enactment is to prevent abuse by individuals exercising authority under a power of attorney and to help ensure finances and estate plans are not misused or altered to benefit the recipient of a power of attorney.

The below discussion provides an introduction to the use of powers of attorney (POA) and some of the issues addressed by the new power of attorney law in Iowa. If you have questions about your existing power of attorney or about establishing a power of attorney, you should speak with a licensed attorney.

Introduction to Powers of Attorney

A power of attorney gives authority to another person or persons to act on behalf of another and make decisions regarding that person’s property and finances. The power of attorney is documented in written form and often drafted by an attorney. The person granting the power of attorney may limit the authority of the power of attorney to specific pieces of property or financial affairs. It may also grant very broad authority, depending on the wishes of the person granting the power of attorney.

Authority granted in relation to health care decisions are often referred to as a Health Care Power of Attorney and are often addressed in a separate document. The new Iowa law does not address Health Care POAs and they are not affected by the IUPAA.

POA Terminology

The new law provides several definitions of key terms and makes a couple of changes regarding terminology. The person creating a power of attorney, or granting the authority to someone else, is now called the Principal.  The person receiving the authority to act on behalf of the principal is called the Agent. They were previously referred to as Attorney-in-Fact. This change was made in order to avoid confusion regarding an attorney in fact and an attorney at law.

Another change is the use of the term “incapacity” in place of “disability.”  The change was put in place due to the fact that many people with a disability can continue to manage their affairs. The definition of incapacity under the law may include a disability that renders a person unable to manage their property and finances but also includes occasions in which the agent is detained in jail or prison or out of the country and unable to return.

Impact on Existing Powers of Attorney

A power of attorney created prior to enactment of the new law are still valid and will be governed by the law in place at the time the POA was created. As mentioned above, the new law also does not affect a power of attorney limited to health care decisions.

There are other exclusions for very specific powers of attorney. A power of attorney coupled with an interest in the subject of the power, such as power granted to a creditor to perfect title, is not included by the new law. A proxy or delegation of voting rights or management rights relating to a corporation or other entity are also not affected by the Act. Finally, a power created for a government purpose on a government form does not fall under the new law. For instance, a landowner using a Farm Service Agency form to grant a power of attorney to someone to make decisions regarding USDA programs is not affected by the IUPAA.

Effective Immediately or Upon an Event

An agent can specify when the power of attorney becomes effective. Under the new law, if the POA does not specify, the default rule is that it becomes effective immediately. The agent can also specify that it only becomes effective upon incapacitation, upon the determination of its necessity by a designated individual, or upon a certain date.

Conservators and Guardians

One of the concerns addressed by the Iowa Legislature was the interaction, or lack thereof, between an agent under a POA and a conservator or guardian. The law provides that the principal can nominate a conservator or guardian who will be appointed by a court, should the need arise for someone to take control of financial or personal decisions. By naming the agent in the POA as the nominee this helps ensure continuity should the court appoint a conservator or guardian.

The default rule under the Iowa law is that the POA is suspended if a conservator or guardian is appointed. This is intended to avoid confusion about who is making decisions for the principal. Again, if the power of attorney nominates the agent as the potential conservator or guardian, the same person will continue to act on behalf of the principal.

Agent Duties and Liabilities

As mentioned previously, the new law is intended to curb misuse of the authority delegated by a power of attorney. For this reason, the Act contains provisions establishing legal duties for the agents. Agents must act:

  •  in good faith,
  • within the scope of authority granted in the POA,
  • in accordance with the principal’s expectations and best interests,
  • to avoid conflicts of interest,
  • with the care, competence and diligence exercised by agents in similar circumstances,
  • to preserve the principal’s estate plan, if known, or otherwise in the principal’s best interests,
  • to cooperate with a health care agent,
  • to keep records, and
  • to make an accounting if requested by the principal or another fiduciary appointed by them or a court.

The first three duties listed above are mandatory. They cannot be waived by the principal in the power of attorney document. The remaining duties are default duties, which can be expressly waived in the POA.

General Powers and Specific Powers

One of the most important changes is in relation to the default powers granted by a power of attorney. Unless stated otherwise in the document, a POA grants the authority for the agent to make decisions regarding real estate, personal property, stocks and bonds, commodities and options, banks and other financial institutions, businesses and other entities, estates and trusts, legal claims and litigation, personal and family maintenance, government programs and military benefits, retirement plans, taxes, and gifts.

While a fairly extensive list of topics for POA authority there are some limits. The following actions may not be undertaken by an agent unless expressly authorized in the written power of attorney.

  • create, amend, revoke, or terminate an inter vivos trust,
  • make a gift,
  • create or change rights of survivorship,
  • create or change beneficiary designations,
  • delegate authority in the POA to another person,
  • waive a principal’s right to be a beneficiary of a joint or survivor annuity,
  • exercise fiduciary powers that a principal possesses, and
  • disclaim property.

Further, even if these powers are included, an agent who is not a spouse, descendant or ancestor of the principal cannot use these powers to create an interest in the principal’s property for themselves. For examples, while an agent who is a sibling may receive the authority to make a gift, by the default rules, they cannot make a gift to themselves.

These are a few of the key issues addressed by the new Iowa law. If you have any questions, don’t hesitate to contact us at 641-682-5447 or online.

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