The Maryland Trust Act and Your General Power of Attorney
On January 1, 2015 the Maryland Trust Act (“MTA”) went into effect. The MTA is the legislature’s adoption of a modified version of the Uniform Trust Code. The Uniform Trust Code is a compilation of generally accepted common law principles designed to provide uniformity in the area of trust administration and interpretation across the nation. Prior to the MTA’s implementation, most Maryland laws governing trusts were also based on similar common law principles. This is important for it means that the MTA largely codified Maryland’s pre-existing approach to trust issues. However, while there are changes which impact trust administration, there is one change in particular in the MTA which can effect ones’ estate plan.
Representation in Trust Matters
If a dispute arises during the administration of a trust, courts will want all the trust beneficiaries to participate in the proceedings. However, determining who exactly these beneficiaries are and who can represent them is not always easy. Prior to the MTA’s passing, there were a limited number of scenarios where Maryland law defined the necessary parties for certain types of legal proceedings. If you fell outside of these defined scenarios, one would have to go to court to ensure that all the necessary parties were properly joined. However, the MTA has offered new methods for individuals to represent and bind other parties
One of these methods is Section 14.5-303(3) of the MTA. It provides that one may be represented by an “agent having specific authority to act with respect to trust matters” and that they “may represent and bind the principal.” This provision applies to what is called a durable power of attorney. This is a common estate planning document wherein you (the principal) designate an individual whom you trust (your agent) to handle your financial affairs. Typically, they are used when the principal becomes mentally and/or physically incompetent and they need their agent to act on their behalf. In Maryland, one can delegate as much or as little authority as they wish to their agent.
The general power of attorney (GPA) is an estate planning document designed to delegate the widest array of powers to your agent. The document can be effective upon its execution or upon the determination that you are no longer competent. In 2010, the Maryland Legislature passed a law which provided the basic format and elements of what was required to be in all newly drafted GPAs. The statutory form lists various specific powers that you can delegate to your agent. Many GPAs largely follow the statutory format verbatim. However, the statutory form largely serves as a floor of what is required to be included in a GPA. It does not represent a ceiling. The right of a principal to authorize their agent to represent their interests in trust matters is not a part of the statutory format. Accordingly, many GPAs do not include this power.
Is your General Power of Attorney up to date?
Best practices would dictate that a properly drafted GPA should already have this power specifically granted to your agent. However, the MTA makes the inclusion of this power in your GPA all the more important. The statute states that an individual’s GPA must grant their agent the “specific authority” to act on their behalf in regards to trust matters. Therefore, the statute clearly implies that this is a specific right one can grant to their agent. Accordingly, the absence of such a clearly stated power in one’s GPA strongly implies that the principal choose not to grant his agent this power.
Prior to the MTA, an agent may have been able to argue that the statutory language of the GPA already covered this area. One of the powers contained in the statutory language gives your agent the right to represent your interested in regards to “claims and litigation.” However, that is no longer likely the case. Nowhere in the statutory language regarding “claims and litigation” does it mention anything pertaining to trust matters. The MTA clearly indicates that one’s GPA must specifically include the authority to represent the principal in trust matters. Accordingly, it is unlikely that the “claims and litigation” provision will be seen as sufficient to be inclusive of trust matters.
Failure to have this power delegated to your agent in your GPA could have serious consequences. For example, assume that a loved one is a beneficiary of a trust. Further assume that the individual does not have a GPA which authorizes an individual to represent their interests in such matters. Often the only way one can be appointed to represent their interests is by seeking a court determination over the matter. As there may be different family members who want to represent that individual’s interest, the litigation could prove to be costly and contentious. A properly drafted GPA avoids this result and allows you to select who you trust to handle such matters. Accordingly, it is important that individuals review their GPA to ensure that it has been properly drafted to address this new statutory change.