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Planning for Your Second Half of Life

When you are ready to choose a law firm to help you with your planning, choose the firm that is willing to provide and stand behind the most comprehensive and thorough eldercare planning available: Steinbacher, Goodall & Yurchak.

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If you have an existing power of attorney, you may already be well acquainted with the document.  However, you may not be aware of recent changes to Pennsylvania’s law governing financial powers of attorney. 

A power of attorney (“POA”) is a foundational estate planning document that allows another individual to act and make decisions on your behalf.  Such authority is especially important if you ever lose mental capacity or are unable to act.  In the written POA, the individual executing the document (the “principal”) appoints another individual (the “agent”) to make financial or health care decisions for the principal. Durable powers of attorney are not affected by the subsequent incapacity of the principal.

Recently, the law in Pennsylvania changed as it relates to powers of attorney that deal with financial directives. Act 95 was signed into law in July 2014 by Governor Tom Corbett. Parts of the law became effective immediately and the remaining portions were effective as of January 1, 2015.

One of the driving forces behind the change was a Pennsylvania Supreme Court case.  The Justices reviewed whether statutory immunity extended to third-parties, such as banks and financial institutions, who relied upon a POA that appeared valid on its face, but in fact was not legally valid.  Such a scenario exists if a third-party is presented with a POA that has all of the execution requirements and formalities, such as the principal’s signature in front of a notary public along with the principal’s notice and agent’s acknowledgment; however, the principal was actually incapacitated when he or she signed the POA.  In the case before the Pennsylvania Supreme Court, the court decided that third-parties are only entitled to immunity when they act upon legally valid POAs and not those that only appear valid on their face. 

How were third-parties to determine whether the principal was competent when he or she executed the POA?  Act 95 sought to address this concern and also bring Pennsylvania’s POA law more in line with the Uniform Power of Attorney Act, which is a model that all states are encouraged to adopt. 

Here is a list of key changes from Act 95:

  1. New Requirements for Executing a POA: The principal must execute the POA before a notary public and 2 independent witnesses;
  2. New Formalities Required: The first page of the POA must include a statutory “notice” in capital letters signed by the principal.  A “notice” was already required, but now the language has been updated to include more information regarding the agent’s ability to act and to make it consistent with the other changes of the law. Similarly, the agent must sign an “acknowledgment” specifying the agent’s duties, which were also updated for consistency;
  3. Agent’s Duties Specified: Act 95 specifies three mandatory duties for the agent acting under a POA: acting in good faith; acting only within the scope of authority granted in the POA; and acting in accordance with the principal’s reasonable expectations (if actually known) or in the principal’s best interests.  While the statute includes additional duties for an agent (regarding record keeping, comingling funds, etc.), those duties are defaults, and the POA can contain customized language modifying the agent’s responsibilities in those areas;
  4. Third-Parties’ Ability to Request Information: A third-party who is presented with a POA may now request (i) an agent’s certification regarding factual matters concerning the principal, agent, or POA; (ii) an English translation if the POA is in a language other than English; and (iii) a legal opinion confirming whether the agent is acting within the scope of authority granted in the POA; and
  5. Immunity and Acceptance of a POA: A third-party may in good faith accept a POA if the third party is without actual knowledge of the POA being void or deficient.  Absent a permissible reason for a third-party to refuse a POA, the third-party must either accept the POA or request one of the items outlined above under #4 within 7 days after being presented with the POA.  If the third-party requests an item under #4 above, then within 5 days after receiving the requested information, the third-party must accept the POA unless there is a substantial basis for making further request.  A person who refuses to accept the POA is subject to civil liability or a court order mandating acceptance.

What is the take-away from all of this?  If you have a current financial POA, you should consider making an appointment to consult with an attorney to see whether your POA should be updated due to the new law. Call Steinbacher, Goodall & Yurchak at 1(800) 351-8334 today to schedule your FREE consultation to review your Power of Attorney, and to discuss your Estate and Long-Term Care Planning goals.

*Certified as an Elder Law Attorney by the National Elder Law Foundation

 

What Are You Waiting For?

Let's say you have a child with "special needs," or another family member. If your estate plan doesn’t have a special needs trust, why not? Here are a few of the excuses I’ve heard, and some thoughts to consider:

I don't have enough money to justify a special needs trust. Really? You don't have $2,000? Because that's all you have to leave to your child outside a special needs trust to jeopardize their SSI and Medicaid eligibility.

I can't afford to pay for the special needs trust. It can be expensive to get good legal help. But the cost of preparing a special needs trust for your child is likely to be much less than the cost of care for a couple of months, which is what will happen if you die without a special needs trust, since it will take that long to maneuver an alternative plan in place. Even if there is no loss of benefits, the cost of fixing the problem after your death will be several times that of getting a good plan in place now, and the result will not be as good.

On January 23, 2015, in an attempt to “maintain the integrity of the program,” the VA proposed sweeping changes to its regulations regarding net worth and asset transfers. While some of the proposed changes may be favorable to a claimant by providing some clarity and consistency, many of them may significantly impact a veteran’s eligibility for benefits and the timeline in which they will be received.

The Good: Establishing a Bright Line Net Worth Limit

Currently, the VA does not have a clearly established net worth limit. While the VA takes into account such factors as liquidity of assets, number of dependents, and life expectancy of the claimant, there are no definitive criteria for determining whether a claimant’s resources are sufficient to meet their basic needs without the pension. However, it has been our experience that only those applicants with a net worth below $80,000 (the lower, the better!) are seriously considered.

With the increase in complexity of today's family structures and the dynamics that can result, the family members of a loved one who has passed away often find themselves in a position in which they question the validity of their loved one's purported estate plan.  The family members may doubt that the decedent's disposition actually reflects his or her wishes, and as a result, the family may want to challenge the will's validity.  In order to successfully do so, the family members typically must file a will contest action.  In such actions, the court is asked to disregard the decedent's will and instead provide a distribution of the decedent's estate which more closely resembles what the decedent actually intended.  The family members must allege that there are grounds for setting aside the decedent's will, including the following:

  • Undue influence—A will contest on the basis of undue influence involves the issue of whether the decedent, of his or her own free will, made the distribution provided in his or her estate plan, free from coercion by another individual.  In Pennsylvania, a person challenging a will on the basis of undue influence must demonstrate the following elements: 1) a confidential relationship between the proponent of the will's validity and the testator; 2) the proponent of the will's validity receives a substantial benefit under the will; and 3) the testator had a weakened intellect.