New Changes to Pennsylvania Powers of Attorney Law Effective January 1, 2015
On July 2, 2014, Governor Corbett signed Act 95 into law which provides a number of changes to forms of, liability under, and effective authority regarding , powers of attorney (“POAs”) in Pennsylvania. While some provisions took effect immediately, such as definitions, acceptance and reliance upon the POA, and refusal to accept a POA, the substantive changes to the notice and acknowledgement language and revised authority provisions in the new law go into effect on January 1, 2015.
Note that these changes don’t apply to POAs that serve to make health care decisions.
Powers of Attorney executed on or after January 1, 2015 now require:
- Notarized signature of the principal (notary cannot be the agent)
- Principal’s signature to be witnessed by two (2) individuals each of whom is 18 years of age or older (subscribing witnesses cannot be the notary or the agent).
- Modified notice language to principals that agent must act in accordance with the principal’s “reasonable expectations”, if known by the agent, and otherwise to act in good faith and act only within the scope of authority granted under the power of attorney and notice that that the agent has the power to give away principal’s property or substantially change how it is distributed at your death;
- New Agent acknowledgement form replacing the former “exercise the powers for the benefit of the principal” language, to now require the agent to act in accordance with the principal’s reasonable expectations, if actually known, and otherwise in principal’s best interest, act in good faith and only within the power granted in the power of attorney. Further, the three statements about keeping assets separate from agents assets, exercising reasonable caution, and prudence, and keeping records of all action, have been deleted, but somewhat provided for in other sections of the new law.
The new POA law also divides the agent’s duties into two (2) categories; those that cannot be waived (5601.3 (a)) and those that can be waived (5601.3(b)). Thus, it is important for principals to understand the laundry list of duties and decide which to accept, modify, or waive, and for agents to know the scope of their authority to act. For example, under the new act, the agent only has the following powers if the power of attorney specifically provides the agent with the power to i) create, amend, revoke or terminate an inter vivos trusts, ii) make a gift, ii) create or change beneficiary designations or rights of survivorship, iv) delegate powers under the power of attorney or exercise powers the principal has authority to delegate, v) waive beneficiary rights on a joint and survivor annuity or retirement plan, or vi) disclaim property or power of appointment.
The new POA law also limits the liability of agents, provided they act in good faith. Now, if an agent acts in good faith, the agent cannot be held liable for failure to preserve an estate plan or if the value of the principal’s property declines. This should limit the potential claims against agents by those family members acting as “Monday morning quarterbacks” after the fact.
In response to the Vine v. Commonwealth decision (holding that that a third party cannot rely on a facially valid POA ), the new law provides broad protections for banks and other third parties who in good faith accept a power of attorney without actual knowledge that a signature or mark is not genuine. To further protect these parties, the law provides options to third parties to verify certain documentation including asking for an English translation of the POA and an opinion of legal counsel that the agent is acting within the defined scope of the POA. Essentially, that third party relying upon a facially proper POA now has immunity from claims if the power of attorney is faulty, with limited exceptions.
Finally, the new law places civil liability for a third parties’ refusal to accept a power of attorney, unless, for example, that third party has actual knowledge that the power of attorney is not executed properly, is otherwise not valid, or is the subject of a report under the Older Adults Protective Services Act.
Now is the time to review your estate planning documents, including your power of attorney documents, to ensure that they are in proper form, enforceable, and provide the authority and power you intend for your agent(s). This will be important to ensure they can act when the need arises.
Attorney Thomas Capehart provides estate planning and administration services to individuals in the Lehigh Valley. For more information on the changes to Pennsylvania’s POA law, contact Tom at 484-224-2780 or firstname.lastname@example.org.