Minnesota Common Law Power of Attorney

Minnesota Common Law Power of Attorney

Minnesota Common Law Power of Attorney

A Minnesota common law power of attorney is a document which is used to create a legal relationship whereby one party – known as a principal, authorizes another party – known as an “attorney-in-fact”, to act on behalf of the principal in regards to certain specified legal matters.

Minnesota Common Law Power of AttorneyAuthority

Minnesota powers of attorney can be created either pursuant to:

  • statutory authority – including that which authorizes the execution of a Minnesota Statutory Short Form Power of Attorney, or
  • nonstatutory authority – historical “common-law”.

In addition, powers of attorney which are validly created pursuant to the laws of another state or country are also recognized in Minnesota – for some purposes.

However, the effectiveness of a foreign jurisdiction or Minnesota common law power of attorney may be limited if a third-party will not recognize its validity.

Minnesota Common Law Power of Attorney Nature

A Minnesota common law power of attorney can be either:

  • durable” – which will continue to be effective even if the principal becomes incapacitated, or
  • nondurable”, which will terminate upon the incapacity of the principal.

Minnesota Common Law Power of Attorney Durable

A Minnesota common law power of attorney isdurableif it contains a provision similar to the following:

This power of attorney shall not be affected by incapacity or incompetence of the principal“.

However, a Minnesota common law power of attorney document may use the term “disability” in lieu of incapacity or incompetence in such a statement and still be a durable Minnesota common law power of attorney.

Minnesota Common Law Power of Attorney Effectiveness

While the effectiveness of a Minnesota common law power of attorney document created pursuant to nonstatutory common-law can be effective upon execution of the document, it can also be conditioned upon the future incapacity of the principal, if the form contains a provision similar to the following:

This power of attorney shall become effective upon the incapacity or incompetence of the principal

Minnesota Common Law Power of Attorney Springing

Such a designation creates what is known as a springing power of attorney, because the authority of the attorney-in-fact “springs” into existence upon the satisfaction of such a condition.

Minnesota Common Law Power of Attorney Benefits

A Minnesota common law power of attorney document has the benefit of being more flexible than a Minnesota Statutory Short Form Power of Attorney.

For example, a Minnesota common law power of attorney document may become effective only upon the incapacity of the principal, whereas a Minnesota Statutory Short Form Power of Attorney document will become effective immediately upon its execution by the principal.

In addition, a Minnesota common law power of attorney document can provide the following advantages not available under a Minnesota Statutory Short Form Power of Attorney:

Minnesota Common Law Power of Attorney Gifting

Under the authority of a Minnesota Statutory Short Form Power of Attorney document, an attorney-in-fact is only authorized to make gifts on behalf of the principal to:

  • certain charities,
  • the principal’s spouse, children and other descendants,
  • the spouse of any child or other descendant, and
  • if specifically authorized, to the attorney-in-fact,

for purposes which are in the best interests of the principal.

The Minnesota Statutory Short Form Power of Attorney statute however, specifically limits the attorney-in-fact’s power to transfer gifts to the attorney-in-fact and individuals the attorney-in-fact is legally obligated to support, to those gifts which do not, in the aggregate, exceed the federal gift tax exclusion amount [$14,000 in 2017], per recipient in any one calendar year.

In contrast, a Minnesota common law power of attorney document does not subject the attorney-in-fact to any such $14,000 annual gift limitation – although exceeding the federal gift tax exclusion amount could create other unintended tax issues.

There can be several significant tax and nontax advantages to the increased gifting flexibility permitted under a Minnesota common law power of attorney document.

Minnesota Common Law Power of Attorney Tailored restrictions

Within each statutory category of authority granted to an attorney-in-fact pursuant to a Minnesota Statutory Short Form Power of Attorney document, the scope of the individual powers cannot be limited – other than with respect to certain real estate transactions.

For example, if a principal authorizes an attorney-in-fact appointed pursuant to a Minnesota Statutory Short Form Power of Attorney document to engage in banking transactions, the attorney-in-fact’s authority may not be limited to only one specific account.

In contrast, the authority granted to an attorney-in-fact appointed pursuant to a Minnesota common law power of attorney document could be restricted to less than all of the principal’s bank accounts.

Minnesota Common Law Power of Attorney Self-contained provisions

A Minnesota common law power of attorney document is self-contained in the sense that it need not incorporate by reference any statutory provisions of authority for the attorney-in-fact.

Therefore, third parties who need to determine the scope of authority for an attorney-in-fact appointed by a Minnesota common law power of attorney document would not have to look beyond the document in front of them for such authority.

This can be particularly helpful to out-of-state entities who don’t have access to Minnesota legal counsel and/or statutory sources.

Minnesota Common Law Power of Attorney Compensation of the attorney-in-fact

The Minnesota Statutory Short Form Power of Attorney document contains no explicit provisions regarding the compensation of the attorney-in-fact.

Nevertheless, the attorney-in-fact can reimburse the attorney-in-fact for expenses incurred on behalf of the principal.

However, a Minnesota common law power of attorney document can identify either a minimum, or a maximum, compensation to be paid to the attorney-in-fact for serving in such capacity.

Do-it-Yourself Minnesota Common Law Power of Attorney

While “fill in the blank” Minnesota common law power of attorney document forms can either be downloaded, or otherwise obtained from many sources – including perhaps LegalDoom.com 🙂 – the preparation of such documents is best left to licensed attorneys, who:

  • can not only fill in the blanks properly,
  • but also provide appropriate counsel regarding the legal effect, and perhaps the tax consequences, of the execution and delivery of the Minnesota common law power of attorney document.

There is much that can go wrong when a Minnesota common law power of attorney document is executed which grants improper powers to certain attorneys-in-fact, or is otherwise improperly drafted.

Minnesota Common Law Power of Attorney What Could Go Wrong?

While a Minnesota common law power of attorney document form may appear to be simple and self-explanatory, preparing one is not a job for the do-it-yourselfer.

Minnesota Common Law Power of Attorney Acceptance by Third Parties

Even if properly signed and acknowledged by the principal, a Minnesota common law power of attorney document is not always acceptable to third parties.

If a third party is unwilling to accept the validity of a Minnesota common law power of attorney document, and the principal no longer has the legal capacity to sign a Minnesota Statutory Short Form Power of Attorney document – a conservatorship may be required to be established for the principal – which involves a significant expense.

Minnesota Common Law Power of Attorney Recording

If a Minnesota common law power of attorney document is not properly acknowledged, or fails to include a draftsman’s statement, it will not be recordable in the county real estate records, and thus will not allow a deed to be executed by an attorney-in-fact on behalf of the principal.

Minnesota Common Law Power of Attorney Capacity

If a Minnesota common law power of attorney document does not specify that it is to continue in event of the incapacity of the principal, its effectiveness is greatly reduced, and may not be usable just when it is needed most.

Minnesota Common Law Power of Attorney Necessity of a Conservator

If a Minnesota common law power of attorney document is ineffective for a proposed real estate transaction, and the principal no longer has capacity to execute a deed to the proposed transferee, a Conservatorship proceeding may be necessary in order to transfer the real estate – which would involve a considerable expense.

I have been involved in a Conservatorship proceeding where a Minnesota Power of Attorney document:

  • was improperly prepared by someone other than a licensed attorney, and
  • not effective to allow the attorney-in-fact to convey real property belonging to the principal to purchaser.

It would have been much less expensive had the principal hired an attorney to properly prepare a Minnesota Power of Attorney document.

Minnesota Common Law Power of Attorney Accountability by the Attorney-in-fact

The issue of accountability by the attorney-in-fact to the principal, and perhaps to other family members as well, is a subject which should be properly addressed in a Minnesota common law power of attorney document by the principal – after discussions with a Minnesota licensed attorney.

Minnesota Common Law Power of Attorney Criminal Behavior

In addition to drafting or execution issues which might make a Minnesota common law power of attorney document ineffective, Minnesota County attorneys have had to prosecute several attorneys-in-fact who misused their authority under a Minnesota Power of Attorney document for their own improper financial benefit.

Minnesota Power of Attorney Conclusion

Please contact Minnesota Attorney Gary C. Dahle for assistance with the preparation, or enforcement, of any Minnesota Common Law Power of Attorney document.

Copyright 2017 – All Rights Reserved.

No claim to original government works.

Gary C. Dahle – Attorney at Law

2704 County Road 10, Mounds View, MN 55112

Phone:  763-780-8390   Fax: 763-780-1735

Gary@dahlelaw.com

Legal Disclaimer

Information provided herein is only for general informational and educational purposes. The laws relating to Minnesota powers of attorney involve many complex legal issues.

If you have a specific legal problem about which you are seeking advice, either consult with your own attorney or retain an attorney of your choice.

Gary C. Dahle, Attorney at Law, is licensed to practice law only in the State of Minnesota, and in the State of North Dakota, in the United States of America.

Therefore, only those persons interested in matters governed by the laws of the State of Minnesota or North Dakota should consult with, or provide information to, Gary C. Dahle, Attorney at Law, or take note of information provided herein.

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