Pennsylvania Passes Major Changes for Powers of Attorney
With the new law, Act 95 of 2014, passed by the State Legislature in June and just recently signed by the Governor, Pennsylvania enters a new phase defining the requirements for Powers of Attorney given by individuals to their agents, often spouses or family members. The wording of the commonly recognized Notice will change as will the Acknowledgement signed by the agent at the end of the Power. Other changes affect the substance. For instance, if you want to give certain powers to your agent you might need to specify them.
Your current power of attorney will still be effective but, as more banks and financial institutions will begin to look for the new wording, it would make sense to consider a fresh look at any power of attorney you have now and bring it in line with the new law. If you do not have a power of attorney yet, this would be a good time to consider one. Portions of the law are in effect now. Most will take effect January 1, 2015. As I have written many times before, a valid financial power of attorney is much less expensive and much less difficult than guardianship if you ever become unable through disability, accident or illness to handle paying your bills and your financial affairs generally. Guardianship requires a hearing and a court could appoint someone other than the person you would have named to serve.
Changes in power of attorney formatting and many others will go into effect on January 1, 2015. The primary sections that are effective now concern “Acceptance of and reliance upon power of attorney.” (Section 5608), “Liability for refusal to accept power of attorney.” (Section 5608.1), and “Activities through employees.” (Section 5608.2). There is good reason for this. One huge motivating factor for changes in the law was the concern by banks resulting from a case, Vine v. Commonwealth (2010), that seemed to place responsibility on the party accepting a power of attorney to know whether it was executed properly and in good faith.
The “Vine fix” in the law describes what a bank, financial institution or other party who is presented with a power of attorney can and cannot do. Under the new law, a person, including an employee, who is asked to accept a power of attorney may request and, without liability, rely upon without further investigation (a) an agent’s certification or affidavit, (b) an English translation if any part of the document is not in English (c) an opinion of counsel whether the agent is acting within the scope of his or her authority. They have seven business days in which to decide whether to accept the power of attorney or to request one or more of the above. In practical effect what this might mean is it could take longer to have powers of attorney approved by banks, financial institutions and other organizations and parties. Another possibility is that it may become standard practice to submit powers of attorney with certifications already provided. There is, however, civil liability for refusal to accept a power of attorney that meets all the requirements.
Other provisions that would not go into effect until January 1 include description of the agent’s duties which include a duty to act in accordance with the principal’s reasonable expectations that are actually known by the agent and otherwise in the best interest of the person who gave the power of attorney and to act in good faith and within the scope of authority given. The agent, as previously, is instructed not to commingle funds with his or her own. The new law adds, however, that this does not apply to spouses. As a side note, it was always strange to have a spouse sign an Acknowledgement that she would not commingle funds when she or he already had joint bank accounts with her or his spouse.
Provisions regarding gifting and rules regarding establishing and terminating trusts, beneficiary designations, planning including Medicaid planning, planning to minimize taxes, disclaimers and other provisions need to be read closely since some issues should be addressed directly in the document. Not all powers of attorney are alike and “off the shelf” ones might not be adequate for the new power of attorney law.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.