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:
- New Requirements for Executing a POA: The principal must execute the POA before a notary public and 2 independent witnesses;
- 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;
- 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;
- 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
- 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