Proposed Power of Attorney Act Might Change PA Law
When belonging to groups that take positions on legislation it sometimes happens that you belong to groups that take opposing views. As it turns out, this has happened to me more than once and, recently, a proposed Pennsylvania bill is the subject of contention.
Senate Bill 1358 that would modify Pennsylvania’s power of attorney laws was introduced by Senator Stewart Greenleaf. It was referred to the Judiciary Committee on May 7, 2010 and has been the subject of commentary both pro and con by probate, estate and elder law attorneys.
The changes recommended by SB 1358, if enacted, would significantly tighten the rules affecting agents under powers of attorney. Whether the suggested law would go too far is a subject for debate. To understand the practical effect, some background is needed.
For several years Pennsylvania has struggled with how much authority should be given under a power of attorney. Should an agent, for instance, be permitted to do more than just pay bills. Can assets be transferred, gifted or retitled? Can beneficiaries be changed on insurance policies? What powers should an agent have regarding property that could eventually go to him or herself?
The person who gave the power of attorney, the maker or principal, could be disabled for a considerable period of time. Conditions and laws can change. Should the agent under power of attorney be permitted to take into account changing conditions or should he or she be locked into decisions made before their principal became disabled.
While the answers might seem easy on first analysis, they are more complicated, as are many ideas, than they seem.
The person appointed as power of attorney could be the maker’s spouse, a wife or husband of many years, and any children may be their children. On the other hand, the power may have been given to a distant relative, a casual acquaintance, the owner of a boarding home, or a trusted financial advisor.
In 2007, a Pittsburgh newspaper ran a series of articles focusing on abuses by agents under power of attorney. In one case, a wife of a soldier stationed in Iraq emptied the couple’s bank accounts, sold the house and moved out. In another, an elderly man slipping into dementia, signed a power of attorney an acquaintance downloaded from the Internet. The alleged friend transferred the man’s retirement savings into an out-of-state bank and insisted that the man was penniless.
There is no question that powers of attorney can be and have been improperly used when they fall into the wrong hands which is why I tell clients to use the “checkbook across the table” rule. Trust only someone who you would trust to receive your checkbook across the table now.
One question is whether making the process more cumbersome would result in legislated morality or would it more likely intimidate and drive away good people who would be willing to serve. Fraud and elder abuse laws might be used to discourage abuses.
The wife who emptied the bank accounts would have that ability just with joint titling and without a power of attorney. She acted beyond her authority on the house sale. A tougher law would have been unlikely to change the result.
A few sections of the proposed law to my mind cause the greatest concern.
First, the law would require the person receiving power of attorney to certify along with the current certifications to act for the benefit of the principal and exercise reasonable caution and prudence “I shall preserve the estate plan of the principal, including the effect of intestacy if the principal does not have a will.”
After more than 30 years of practicing law, I would honestly have difficulty defining with certainty what actions would or would not preserve the estate plan of the principal. If, for instance, the maker indicated in his Will that a given bank account was to be received by a beneficiary, would the agent be indefinitely prevented from liquidating the bank account?
Next, the law would prevent an agent from making a gift (other than a “limited gift”, that is the annual exclusionary $13,000), unless the power of attorney stated who would receive it, what would be given, and what are the amounts. Absent clairvoyance, this is difficult.
Under Medicaid rules, assets are not only typically transferred into the name of the healthier spouse for ease of access, they have to be. A spouse in a nursing home could be denied Medicaid benefits if more than $2,400 (or $8,000 in some cases) remains in his or her name.
The Bill would also require return to Court for many more issues than currently. The problem is a difficult one but probably more real life situations need to be considered before it can be resolved.
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.