Virginia Lawmakers Act to Help the Good Guys

During the 2019 Session of the Virginia General Assembly, two legislative changes were made to Virginia’s versions of the Uniform Power of Attorney Act and the Uniform Transfers to Minors Act which will provide aid and comfort to those who seek to protect the financial interests of loved ones who are vulnerable, whether they are elders with dementia or young adults with spendthrift tendencies.    

Recovery of Attorney’s Fees from Those Breaching POAs.  Virginians who have made regrettable choices in naming their agents under their powers of attorney often lack the capacity to take corrective measures (sometimes years later) when the corrupt agent absconds with their assets.  Until this year, friends and family members seeking to remove the agent and reclaim the embezzled assets by court order could not be certain that their personal funds expended on legal fees and court costs would be reimbursed to them.  The General Assembly was presented with an opportunity to resolve that dilemma, and seize it they did.  

By way of an amendment to Virginia Uniform Power of Attorney Act, the Circuit Courts are now authorized to award attorney’s fees to a successful petitioner in litigation in which the agent acting under the power of attorney has been found to have breached his fiduciary duty to the principal.  Virginia Code Sec. 64.2-1614.  The new law was passed to rectify the limited scope of this statute, as correctly noted in a 2018 decision by the Virginia Supreme Court in the case of Mangrum v. Chavis, 18 Va. S. Ct. UNP 160782 (2018).  In Mangrum, the Court ruled that the existing Code Section only addressed whether the agent could be required to return his attorney’s fees paid from the principal’s funds in his own defense, not whether the challenger should be awarded fees against the offending agent personally.  The new legislation appropriately minimizes the personal financial risk of a well-intentioned petitioner who seeks a judicial remedy where an agent under a power of attorney has breached (and perhaps continues to breach) his or her fiduciary duties to the principal.  

Uniform Transfers to Minors Act Extended to Age 25.  The Virginia Uniform Transfers to Minors Act was modified for the better, in that it now allows the person transferring property to a custodian for the benefit of a minor to defer the outright delivery of the property until the minor attains the age of 25 years.  Under current law, the property must be paid over by the custodian once the minor attains 18 years of age or, if the donor desires to defer receipt of the property until the minor reaches age 21, then the transfer document must include the parenthetical “(21)” after the words, “Virginia Uniform Transfers to Minors Act.”  The new statute enables donors to extend the deferral of mandatory delivery by the custodian until the age of 25, so long as the transfer is made while the minor is still under age 25 and the instrument creating the custodianship references the “Virginia Uniform Transfers to Minors Act (25).”   

The deferral of the delivery for these four additional years is not guaranteed, however.  If the custodial property transferred under the UTMA (25) is an irrevocable gift, then (for reasons related to the exclusion from federal gift tax) the statute allows the minor to deliver a written request to the custodian requiring the transfer of the property after his 21st birthday, provided that the request is delivered between 30 days before and 30 days after that birthday, or within 30 days of the delivery of written notice to the minor of his right to terminate the custodianship, whichever is later.  If the beneficiary misses or waives this window of opportunity, then the property will remain in the hands of the custodian until delivered, if not before (on a discretionary basis), then upon the 25th birthday of the beneficiary.  

It is possible to avoid the scenario in which the beneficiary defeats the donor’s intention to keep the property in the UTMA (25) account with the delivery of written notice at his 21st birthday.  The solution is to create and fund a separate trust instrument which enables the trustee to maintain discretionary authority over distributions to the beneficiary until the age of 25 (or well beyond, if so desired).  As a practical matter, most gifts being made to minors are of a dollar amount that make the UTMA custodial arrangement more economical than a stand-alone trust, since the former can be established at most banks and investment firms.  Perhaps some comfort may be taken in the knowledge that the new statute at least enables the donor to avoid the mandatory distribution of the UTMA (25) account upon the 21st birthday of the beneficiary.