North Carolina Adopts New Power of Attorney Statute

December 1, 2017

Effective January 1, 2018, North Carolina has a new power of attorney statute: the North Carolina version of the Uniform Power of Attorney Act. This new law brings clarity to many issues concerning powers of attorney and provides increased guidance and flexibility, so North Carolinians should consider replacing powers of attorney prepared under previous laws with forms based on the new statute. This statutory change does not impact healthcare powers of attorney but controls durable powers of attorney, often referred to as general powers of attorney.

A power of attorney permits the agent (formerly attorney-in-fact) for the principal (maker of the power) to do actions on behalf of the principal, either as a convenience or as a necessity — for example, if the principal is incapacitated. The new statute describes in detail the actions the agent can take concerning specific types of assets. Importantly, it also provides guidance, or standards, for acting in the principal’s interest under the power of attorney, which likely will make people more comfortable signing a power of attorney. It also provides greater incentives to and assurances for third parties accepting powers of attorney.

Perhaps the biggest practical change in the new statute is the recording requirements for durable powers of attorney. The old laws required durable powers of attorney to be filed in the Register of Deeds office in the principal’s county of residence to remain effective should the principal become incompetent — i.e., to be durable and survive incompetency, counter to the common law rules. The new law does not require recording for durability, so this change alone is a substantial reason to move to the new power of attorney forms under the new law. (A power of attorney for real estate would still be recorded in the Register of Deeds as part of the real estate transaction.)

While the new statute provides a statutory form, many estate planners will suggest a form with more direction and detail, partly to protect the principal and agent from inadvertent tax impacts from the power of attorney and to permit further estate planning, as appropriate, under the power of attorney. The statute also provides a power-of-attorney form for real estate transactions and a form for certification by the agent of powers to enhance acceptance of the power of attorney. One goal of the new statute is to ease acceptance of these powers of attorney by persons or entities receiving them who will be relying on them.

In summary, beginning January 1, North Carolinians should consider executing powers of attorney under the new North Carolina law. While powers of attorney that were effective under the old law are supposed to remain effective, they lack the advantages of the new law and over time will be increasingly hard to use.

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