Wisconsin Business Law Blog : Waukesha, New Berlin, Oconomowoc Corporate & Real Estate Lawyer & Attorney

 A Power of Attorney (POA) is often used in Estate Planning, Business and Real Estate transactions. The creator of the POA, called the "principal" gives someone else, called the "agent" the authority to sign on behalf of the principal and bind the principal as if the principal had signed.

On September 1, 2010, Wisconsin's new POA statute, Chapter 244, Wis. Stats., became effective. The new law does not change the validity of existing POA's, but expanded on and clarified much existing law surrounding POA's.

The law now sets forth rules regarding reimbursement and compensation of agents. It sets forth agent duties and rules. Beyond that, the two most significant changes are: 

1. a POA now becomes effective upon execution, unless otherwise stated in the POA; and
2. all new POA's are durable, unless otherwise stated.

Durable POA's continue to be effective, even if the principal making the POA becomes incompetent.

POA's are useful in estate planning, because they allow changes to occur after the principal becomes incompetent. Such changes may have the result of protecting assets and thereafter qualifying the principal for Title 19 benefits. Wisconsin law permits the agent to make such changes, but only if the power to do is is expressly set forth in the POA document. Likewise, any other act by which the principal's estate may be used, including self-dealing by the agent, must be clearly set forth in the POA.

Even when the principal gives the agent the power to make gifts or diminish the principal's estate, the law limits such gifting to the annual federal gift tax exclusion amount per donee, unless specific language expands such limit. In addition, the agent must make such gifts "in the principal's best interest." The factors to determine such "best interest" are:

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Wisconsin foreclosure law generally allows a lender the option to shorten the debtor’s redemption period in return for agreeing not to go after the “debtor” for any “deficiency” after the sale of the real estate (i.e. if a property sells for less than the amount due the lender at the foreclosure auction, the lender has no right to go after debtor personally for the difference if lender elects a shorter redemption period). In Bank Mutual v. S.J. Boyer Constr., 2009 WI App 14, the appellate court concluded that a lender was also prohibited from going after a “guarantor” of the “debtor” if the shorter redemption period is chosen by the lender. This appellate court decision was recently overruled by the Wisconsin Supreme Court in Bank Mutual v. S.J. Boyer Construction, Inc., 2010 WI 74 (July 9, 2010). In summary, the Wisconsin Supreme Court held that by choosing a shorter redemption period the lender is precluded from seeking a deficiency judgment against the “debtor,” but the lender may still seek a deficiency judgment against the “guarantor” for any deficiency resulting from the sale at auction. Given that many, if not most, of relatively smaller commercial real estate projects are developed in single purpose limited liability entities where lenders require personal guarantees from owners of the entities (and others), this decision appears to be quite beneficial for lenders in that it allows them to, among other things, speed up the sales process without giving up the ability to go after the guarantors for any difference between the sale price and the balance of the amount due the lender

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