Power of Attorney in Minnesota: Types, Requirements, and Key Considerations
A power of attorney is a legal document that authorizes one person (the agent or attorney-in-fact) to act on behalf of another person (the principal) in financial, legal, or business matters. In Minnesota, the power of attorney is governed primarily by Minn. Stat. Section 523.23-24, which provides a statutory short form that is widely recognized by financial institutions, government agencies, and other third parties.
Establishing a power of attorney is one of the most important steps in a comprehensive estate plan. Without one, family members who need to manage a loved one’s affairs during a period of incapacity may be forced to seek a court-appointed conservatorship, a process that is expensive, time-consuming, and public.
Types of Power of Attorney in Minnesota
Minnesota law recognizes several forms of power of attorney, each suited to different circumstances and objectives.
General Power of Attorney
A general power of attorney grants the agent broad authority to act on the principal’s behalf across a wide range of financial and legal matters. This may include managing bank accounts, buying or selling real property, operating a business, filing tax returns, and handling investment accounts. A general power of attorney terminates automatically if the principal becomes incapacitated, unless the document specifies that it is durable.
Durable Power of Attorney
A durable power of attorney includes specific language stating that the agent’s authority continues even if the principal becomes incapacitated. Under Minn. Stat. Section 523.07, a power of attorney is durable if it contains the words “This power of attorney shall not be affected by disability of the principal” or similar language indicating the principal’s intent.
Durability is the feature that makes a power of attorney most useful for estate planning purposes. Without it, the document becomes ineffective at precisely the moment it is most needed.
Limited (Special) Power of Attorney
A limited power of attorney grants the agent authority to act only in specific, defined matters. For example, a principal might authorize an agent to sell a particular piece of real estate, manage a single financial account, or handle a specific business transaction. The agent has no authority beyond what the document expressly grants.
Springing Power of Attorney
A springing power of attorney does not take effect immediately upon execution. Instead, it “springs” into action upon the occurrence of a specified event, typically the principal’s incapacity as determined by one or more physicians. While this approach offers the comfort of knowing that no one has authority until it is truly needed, it can create practical difficulties. Financial institutions may be reluctant to accept a springing power of attorney without clear proof that the triggering condition has been met.
Minnesota’s Statutory Short Form Power of Attorney
Minn. Stat. Section 523.23 establishes a statutory short form power of attorney that provides a standardized template for granting financial powers. The statutory form covers thirteen categories of authority:
- Real property transactions
- Tangible personal property transactions
- Bond, share, and commodity transactions
- Banking transactions
- Business operating transactions
- Insurance transactions
- Beneficiary transactions
- Gift transactions
- Fiduciary transactions
- Claims and litigation
- Family maintenance
- Benefits from military service
- Tax matters
The principal can grant authority in all categories or select only those that are relevant. Each category is defined in detail in Minn. Stat. Section 523.24, which specifies exactly what powers each designation includes.
Advantages of the Statutory Form
The statutory short form carries significant practical advantages. Because it is established by statute, financial institutions and other third parties are generally more willing to accept it. Minnesota law also provides that a third party who refuses in good faith to accept a statutory short form power of attorney may be held liable for attorney fees and damages if a court determines the refusal was unreasonable.
Customization
While the statutory form provides a solid foundation, many principals benefit from customizing their power of attorney to address specific circumstances. An experienced attorney can draft provisions that expand, limit, or clarify the agent’s authority beyond what the statutory categories provide.
Agent Duties and Responsibilities
An agent under a power of attorney holds a fiduciary position, meaning they must act in the principal’s best interest at all times. Minnesota law imposes several specific duties on agents:
Duty of Loyalty
The agent must act solely in the principal’s interest and avoid conflicts of interest. Self-dealing, meaning transactions that benefit the agent at the principal’s expense, is prohibited unless the power of attorney document expressly authorizes it.
Duty of Care
The agent must exercise the same care, diligence, and prudence that a reasonably prudent person would exercise in managing their own affairs. This includes keeping accurate records of all transactions, preserving the principal’s assets, and following the principal’s known wishes.
Duty to Account
The agent must keep detailed records of all transactions conducted on the principal’s behalf and make those records available for review. While Minnesota does not require agents to file regular accountings with a court, interested parties can petition a court to compel an accounting if they suspect mismanagement.
Duty Not to Commingle
The agent must keep the principal’s assets separate from their own. Commingling funds is a red flag for financial abuse and can expose the agent to personal liability.
Third-Party Acceptance Issues
One of the most common practical challenges with powers of attorney involves third-party acceptance. Banks, brokerage firms, and other financial institutions sometimes refuse to honor a power of attorney, citing concerns about its validity, the agent’s authority, or institutional liability.
Minnesota law addresses this problem in several ways. Minn. Stat. Section 523.20 provides that a third party who acts in good faith reliance on a power of attorney is protected from liability, even if the power of attorney is later found to be invalid. Conversely, a third party who unreasonably refuses to accept a properly executed power of attorney may face legal consequences.
Despite these protections, practical difficulties persist. Some institutions require their own proprietary power of attorney forms. Others impose waiting periods for review. Principals can reduce these obstacles by working with an attorney who understands how to draft documents that financial institutions are likely to accept and by providing copies to key institutions in advance.
The Relationship Between Powers of Attorney and Healthcare Directives
It is important to distinguish between a financial power of attorney and a healthcare directive. In Minnesota, these are separate documents that serve different purposes.
A financial power of attorney governs the agent’s authority over the principal’s financial and legal affairs. It does not authorize the agent to make medical decisions. Healthcare decisions in Minnesota are governed by the Health Care Directive statute, Minn. Stat. Section 145C, which allows an individual to appoint a healthcare agent and document treatment preferences.
While the same person can serve as both financial agent and healthcare agent, the authority must be granted in separate documents. Many estate planning attorneys recommend appointing the same trusted individual in both roles to ensure coordinated decision-making during a period of incapacity.
Revoking a Power of Attorney
A principal may revoke a power of attorney at any time, provided they have the mental capacity to do so. Revocation should be done in writing, and the principal should provide notice of the revocation to the agent and to any third parties who may have received copies of the original document.
A power of attorney is also automatically revoked in several circumstances:
- Death of the principal. A power of attorney terminates immediately upon the principal’s death. The agent has no authority to act after that point, and estate administration passes to the executor or personal representative named in the will.
- Court-appointed conservatorship. If a court appoints a conservator for the principal, the conservator’s authority generally supersedes that of the agent.
- Divorce. Under Minn. Stat. Section 523.08, if the principal’s spouse is named as agent and the marriage is dissolved, the former spouse’s authority as agent is automatically revoked.
Creating an Effective Power of Attorney
Several considerations help ensure that a power of attorney functions as intended:
- Choose the right agent. The agent should be trustworthy, financially responsible, and willing to serve. Many principals name a spouse as primary agent and an adult child or sibling as successor.
- Consider co-agents carefully. Naming two agents who must act jointly provides a check-and-balance system but can create logistical difficulties. Naming them to act independently provides flexibility but reduces oversight.
- Use durable language. For estate planning purposes, the power of attorney should almost always be durable, meaning it remains effective during incapacity.
- Be specific about gifting authority. If the agent should have authority to make gifts for tax planning purposes, this must be expressly stated. The statutory short form allows gifting authority, but many principals choose to impose limits.
- Review periodically. A power of attorney should be reviewed every three to five years, or whenever significant life changes occur.
A power of attorney is one component of a comprehensive estate plan. Understanding how it interacts with other documents, including wills, trusts, healthcare directives, and beneficiary designations, is essential to ensuring that the plan works as a cohesive whole. Our estate planning checklist can help you assess which documents you still need. An overview of relevant Minnesota estate planning laws provides additional context for these planning decisions.