The legality of digital power of attorney is not a straightforward matter. The question of whether a digital signature can be used to sign power of attorney depends on the individual circumstances and state laws. In general, people may prefer power of attorney to be authorized via wet signature, since the document will need to be notarized anyway. But in many cases, a digital power of attorney option does exist and may be more convenient. eSignatures, including typed signatures, are the final and crucial aspect in these cases.
Digital Power of Attorney Depends on State Laws
Power of attorney allows one party, the agent, to make financial decisions on behalf of another party. This is obviously a very sensitive document and consent must be meticulously documented. At the same time, many parties may prefer to execute the documents electronically. If that’s the case, they will normally want to use a digital signature. But is that legally valid?
The answer to that question depends on the nuances of the Electronic Signatures in Global and National Commerce Act (ESIGN), the Uniform Electronic Transactions Act (UETA) and other state laws that govern the use of eSignatures.
States that have adopted the UETA, will use that law as a basis of the determination rather than the ESIGN Act. But three states that have not adopted UETA — New York, Illinois and Washington — answer to the ESIGN Act.
It’s important to note that the majority of states do not require a written Power of Attorney, though there are specific exceptions such as healthcare and real estate transactions.
Given that POAs don’t usually need to be in writing to begin with (though often they are as a matter of convention), they can be executed electronically with an eSignature. If the POA document does need to be in writing, however, the question of whether a digital signature is acceptable depends on the purpose of the POA.
For example, the UETA and EIGN Acts only authorize the use of electronic records and eSignatures (instead of a traditional wet signature) during a “transaction,” related to “business, commercial, or governmental affairs.”
If the POA is required to be in writing, the eSignature laws should authorize the use of electronic records and signatures in its execution. If the POA is not required to be in writing, then using an eSignature is also not necessary, but can be optionally used.
Exceptions to Digital Power of Attorney
But it’s less clear how eSignature laws apply to healthcare directives, particularly in states that have not adopted the Uniform Power of Attorney Act (UPAA). These documents usually allow the agent to represent the principal under many circumstances, even if they don’t fall under the specified transaction. Furthermore, the appointment of the agent may not even be considered to fall under “conduct of business, commercial, or governmental affairs.” The Reporter’s Comments to the UETA (specifically Comment 9 to Section 3) acknowledge this gray area:
“Records used unilaterally, or which do not relate to business, commercial (including consumer), or governmental affairs are not governed by this Act in any event, and exclusion of laws relating to such records may create unintended inferences about whether other records and signatures are covered by this Act…”
Health POAs have been established in some States. These POAs may be subject to unique requirements regarding execution, acknowledgment and even notarization. Typically, such powers are not considered a transaction and therefore wouldn’t be covered by the Act.
However, even if such a record were to arise in a transactional context, this Act operates simply to remove the barrier to the use of an electronic medium, and preserves other requirements of applicable substantive law, avoiding any necessity to exclude such laws from the operation of this Act. Especially in light of the provisions of Sections 8 and 11, the substantive requirements under such laws will be preserved and may be satisfied in an electronic format.
Accordingly, under existing law the ability to use electronic records and signatures in connection with a POA may depend on one or more of the following: (1) the purpose for which the POA is created, (2) any specific legal requirements related to the formation of the POA, and (3) the purpose for which the POA is used. In addition, note that it is not clear whether a revocation of a POA, if required by state law to be in writing, constitutes a “transaction” – creating the possibility that revocation could not be done using electronic records and signatures, either.
For states that have adopted UPAA without significant variation, the ability to use electronic records and signatures for durable powers of attorney is clearer: except for POAs related to healthcare and other exemptions, the POA can be completed using electronic records and signatures.
There may be additional considerations in those states that have not adopted the uniform version of the UETA. This includes Washington state, which did adopt UPAA but did not adopt the definitions allowing for electronic records or signatures, and New York, which expressly excludes certain POAs from coverage under the New York Electronic Signatures and Records Act, but separately authorizes electronic execution of some POAs under other law.
The Bottom Line: Digital Power of Attorney is Usually Possible
In most cases, digital power of attorney is legally recognized. This is especially true in cases where it’s not even necessary to have a written POA. If a company or person chooses to electronically execute their POA, they should consider adopting eSignature software to go along with it.