Changes to Pennsylvania Power of Attorney

Along with a will and a health care power of attorney, one of the foundation documents for most peoples’ estate plans is the durable general power of attorney, which allows an agent to act on behalf of the person with respect to the person’s finances and property.  In July of this year Act 95 of 2014  was signed into law imposing changes on the Power of Attorney used in Pennsylvania for powers executed on or after January 1, 2015.

Principal changes are as follows:

  • For a Power of Attorney executed on or after January 1, 2015 the signature mark of the principal must be acknowledged before a Notary Public and witnessed by two individuals.  This is a departure from the prior requirement, where only an individual signing by using a mark, rather than his signature, was required to obtain witnesses to his or her signing.
  • The Act requires that the front page notice currently on all Powers of Attorneys must now include particular language that reminds the person granting the Power of Attorney among other things that an agent under a Power of Attorney can give away “all of your property while you are alive.” (A pretty effective warning if you think about it.)
  • Conversely, the Act requires that the Acknowledgment, which the agent under the Power of Attorney must sign, reminds the agent that he or she shall “act in accordance with the principal’s reasonable expectations to the extent actually known by (him or her) and otherwise in the principal’s best interest.”  The acknowledgment further advises the agent that he must act in good faith and only within the authority granted under the Power of Attorney.
  • The changes also go further in defining statutorily the agent’s duties to the principal.  The statute now sets forth that the agent has to act, inter alia, without a conflict of interest, with care, competence and diligence, by keeping a record of all receipts, disbursements and transactions, and in cooperation with the person who has authority to make healthcare decisions for the principal.

The Act now imposes upon the agent the duty to “attempt to preserve the principal’s estate plan, to the extent actually known by the agent, if preserving the plan is consistent with the principal’s best interest based on all relevant factors.”  This paragraph could have far reaching implications that a proposed agent should be aware of before he signs on.

  • The new Act provides that “(i)f an agent is selected by the principal because of special skills or expertise possessed by the agent or in reliance on the agent’s representation that the agent has special skills or expertise, the special skills or expertise must be considered in determining whether the agent has acted with care, competence and diligence.”  This provision has an obvious impact on an agent who is also a professional such as an accountant, financial planner, or an attorney.  That agent will be judged by a higher standard than, for example, the son or daughter of the principal otherwise might be if he or she were the agent.
  • The meat of the statutory changes involve certain powers of the agent which now must be specifically set forth in the Power of Attorney, in order for the agent to have such powers.  These so-called “hot powers” were sometimes in the past found to be implied in the broader powers, but now such hot powers must be expressly set forth.  They are as follows:
    • The ability to create, amend, revoke or terminate an inter vivos trust;
    • The ability to make a gift;
    • The right to create or change rights of survivorship with respect to the principal’s property;
    • The right to create or change a beneficiary designation (this has become of vital importance considering the amount of property that now passes by way of retirement accounts, life insurance, etc.);
    • The right to delegate authority granted under the Power of Attorney;
    • The right to waive the principal’s rights to certain annuity products and retirement plans;
    • The right to exercise fiduciary powers that belong to the principal; and
    • The right to disclaim property.
  • The Act also clarifies the propriety of using a copy of the POA.  “Except for the purpose of filing or recording under subsection (c), a photocopy or electronically transmitted copy of an originally executed power of attorney has the same effect as the original.”  The practical effect of this is that there is no need to sign multiple originals.
  • Occasionally, financial institutions and banks have not accepted a Power of Attorney and require that such Power of Attorney be done on the form of the bank or the financial institution.  This Act ends that.  Generally speaking, a person shall either accept the Power of Attorney under the Act or request an affidavit from the principal or an opinion of counsel to the effect that the Power of Attorney is valid.  However “a person may not require an additional or different form of power of attorney for authority granted in the power of attorney presented.”

This new law does not invalidate a Power of Attorney that has been executed under the current, pre-2015 law.  It does however provide greater protection to a principal and it may make good sense to review your Power of Attorney with respect to the new law, or simply to obtain a new Power of Attorney done in compliance with the new law to take advantage of the new protections.

Finally, we, as a firm, see cases in which agents have, or at least allegedly have, abused their powers under a Power of Attorney.  The new law may help curb some of those practices.  A Principal signing such a form (while he or she still has capacity) can be his or her own best protector down the road (when he or she no longer has capacity).  Reviewing the form and asking the right questions of yourself, your agent and your lawyer can prove to be very worthwhile.

– Rod Fluck

Posted in Estates / Wills