Maryland’s New Statutory Power of Attorney: Should You Have One?

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March 4, 2011

Lerch, Early & Brewer's Legal Update

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Maryland passed a new law in 2010 regarding powers of attorney (POAs) and how they are to be interpreted in Maryland going forward. Under prior law, it wasn’t always certain whether a power of attorney document would be recognized by third parties. The new law provides a statutory form that must be accepted by third parties in Maryland. The new law also will affect existing agents’ required recordkeeping and disclosure requirements. We offer here a brief review of the new law and how it may impact you.


Powers of attorney have long been used by private parties to designate one party to act on another’s behalf without the need for government involvement. Increasingly, POAs are used in estate planning to designate surrogate decision makers for general financial or health care matters. The authority granted to the designated party continues regardless of the subsequent disability or legal incapacity of the granting party, and is thus said to be a durable POA. However, the authority terminates upon the death of the granting party, and may also be revoked at any time by the granting party or by a court appointed guardian acting on behalf of an incapacitated granting party. A principal is an individual who grants authority to an agent, typically in writing, and the subject matter or scope of the authority so granted may be “general” or “limited.”

Loretta’s Law

Because the authority granted under a general POA is broad and rarely subject to review, there is always the potential for instances where agents abuse their authority to enrich themselves at the cost of the vulnerable, dependent individuals whom they should be protecting. In 2008, the Maryland General Assembly was apprised of such a situation concerning a Pasadena resident suffering from dementia named Loretta Soustek. Ms. Soustek’s niece was convicted of stealing $449,000 from her by improperly using a power of attorney. Bills introduced by several Maryland Delegates and State Senators on Ms. Soustek’s behalf contained remedial provisions designed to curb such abuse. Sometimes referred to as “Loretta’s Law,” the provisions were refined and ultimately enacted two years later in the new 2010 POA law, officially titled the Maryland General and Limited Power of Attorney Act (the “Act”).

Effective October 1, 2010, the Act now incorporates miscellaneous provisions of existing law relating to POAs into one comprehensive statute (health care POAs are covered in a separate statute). For the first time, the Act sets forth statutory forms with model language for both general and limited POAs. The Act introduces new enforcement provisions to facilitate the acceptance of POAs by third parties such as banks and financial institutions. The Act also includes new remedies designed to enhance accountability and to deter misuse of authority on the part of the agent when acting under the POA, and imposes express duties on an agent to act loyally and in the best interest of the principal.

Mandated Acceptance

If the new statutory form POA is used, third parties are required to accept it; however, if the form is substantially changed, third parties may not recognize the agent’s authority, as was the case under prior law. While the Act purports to be applicable to all POAs generally (with expressly defined exceptions), the new enforcement provisions apply only to POAs that are in substantially the same form as the statutory form POAs (i.e., POAs incorporating the model language) Specifically, the Act provides that third parties may not require an additional or different form of power of attorney for any authority granted in the statutory form POA. Third parties refusing to accept a statutory form POA are subject to court orders mandating acceptance of the POA and liability for the reasonable legal fees and costs incurred in obtaining such court orders.

Enhanced Accountability

The Act provides standards applicable to an agent’s actions and defines the liability of the agent in taking such actions under a POA. An agent is duty-bound to act in accordance with the principal’s reasonable expectations, and with care, competence and diligence for the best interest of the principal. While most practitioners believe such duties to have been inherent in the acceptance of an agent’s authority under prior law, Maryland now has a statute expressly stating these duties. The Act also requires detailed recordkeeping and disclosure by an agent of receipts, disbursements, or transactions conducted on behalf of the principal upon request for such disclosure by specified persons or entities, including the principal, or by order of court. These provisions are designed to enhance accountability of the agent, and in turn, deter misuse of the agent’s authority. Significantly, agents acting under a POA executed under prior law will now be subject to the same recordkeeping and other duties imposed on agents under the Act.

Signing Formalities

As of October 1, 2010, the Act requires that a POA be in writing and that the execution of the POA be witnessed by two or more adults and acknowledged before a notary public. However, POAs executed prior to October 1, 2010, are not invalidated by the new law if they fail to meet the new execution requirements. The Act provides that POAs will be deemed valid if executed in other states so long as they were executed in compliance with the other state’s law at the time of execution, or in the case of military POAs, if executed in accordance with federal law.

Should You Replace Your Existing POAs ?

Many clients have asked us whether the new statutory forms are mandatory or whether they should replace their existing attorney-drafted documents. In this regard, the new law does mandate the signing formalities noted above for POAs signed after October 1,
2010. However, reliance on the statutory form language alone may not accomplish what the principal intends. We note that the new Maryland statutory form POA does not address certain specific transactions useful in estate planning, such as gifting and funding revocable trusts.
We think it significant that neither the terms of the Act, nor those of the statutory form POAs, claim to revoke existing POAs executed under prior law. Some clients will not want to incur additional trouble and expense to execute a new POA if their existing POA remains valid. However, some third parties may now become less receptive to accepting non-statutory form POAs or older POAs that lack compliance with the new signing formalities.

In the case of our clients who act as agents under a Maryland POA or as third parties in receipt of one, we are advising compliance with the new law and consultation with counsel when needed to avoid liability. In the case of individuals who wish to grant authority as a principal under a POA, we view the new law as a useful tool they will want to use. We therefore are advising our Maryland clients on a case-by-case basis to consider use of the new statutory forms either in lieu of, or in conjunction with, their existing POAs.

Note: Prior issues of Legal Update addressed powers of attorney generally (Who Needs a Power of Attorney?, Winter 2009), and selection of an agent (Protecting Your Wishes: Appointing Your Attorney-in-Fact, Winter 2010).

Richard Ruprecht advises clients on all aspects of estate planning, including the preparation of wills, trusts, financial POA s and advance medical directives to ensure his clients’ wishes are respected. To learn more about how Maryland’s new POA law affects you, contact him at or 301-657-0154.

This content is for your information only and is not intended to constitute legal advice. Please consult your attorney before acting on any information contained here.