Posted on : Sunday October 24, 2010

By John L. Miles, Jr., Member, MD State Bar Assn.

COLUMBIA, Md.—A new law, effective October 1, 2010, will affect all Maryland residents who are planning – or have already planned – for the eventuality that, at some time in the future,  they may become disabled in some way and will need someone else to pay their bills and look after their financial affairs. The most frequent way to plan for that situation is to go to a lawyer and obtain a General Power of Attorney (GPoA).

In the past, attorneys licensed to practice in Maryland have drafted a GPoA for a client based on the attorney’s analysis of that client’s specific needs. Following that analysis, the attorney then wrote a GPoA using his or her own form and terminology.

The system worked reasonably well, but there were two big problems: (1) No two GPoAs looked exactly the same, and (2) banks and brokerage firms (the places where GPoAs are most often used) had to hire their own lawyers to study each GPoA as it was presented.

The bank lawyer also had to decide whether the person offering the GPoA and seeking to spend the assets of another person (usually a relative and – often – an aging parent) really had the authority to do so.

Sometimes there was definite fraud involved, and banks could be held liable for carelessly accepting a GPoA and allowing a depositor’s assets to be spent by a clever thief. In cases where the banks’ lawyers were unsure, the prudent course was simply to refuse to honor the GPoA. There was no penalty for refusing. Yes, the holder of the GPoA could sue to enforce it, but he or she had to pay attorney’s fees and court costs.

The new law, Maryland Senate Bill 309, is intended to fix both those problems. There is now “a statutory form” for a GPoA. The Senate Bill includes the exact language for a GPoA.

Moreover, any GPoA in that form – or in a “substantially similar” form – must either be accepted by banks and brokerage firms doing business in Maryland or they face a penalty:

Under the new law, a company that refuses to honor a GPoA in the statutory form is liable for reasonable attorney’s fees and court costs of the person who sues to enforce it.

Many Maryland residents now have GPoAs that were prepared for them by attorneys in past years. The new law provides that those documents are still valid and may continue to be offered. However, the financial penalties for refusing the new statutory form will not apply to the older forms.

Maryland residents who obtained their wills and estate plans through the Baptist Foundation’s Stewardship Program from 2004 through 2008 may contact Conrad Burch at (410) 859-8157 to arrange to receive a replacement GPoA in the statutory form at a reduced fee.