Pennsylvania Modifies Provisions Regarding Powers of Attorney
by: Lee Greenberg
The state of Pennsylvania recently modified provisions regarding powers of attorney in House Bill No. 1429. Some of the provisions are effective immediately while others are effective on January 1, 2015.
House Bill No. 1429 requires a power of attorney to be dated, and it must be signed by the principal or by another individual on behalf of and at the direction of the principal if the principal is unable to sign. The signature must be acknowledged before a notary public who is not the agent designated in the power of attorney and witnessed by two individuals, each of whom is 18 years of age or older.
In addition, the legislation requires powers of attorney to include the following new language at the beginning of the power of attorney notice:
- “Your agent must act in accordance with reasonable expectations to the extent actually known by your agent and, otherwise, in your best interest, act in good faith and act only within the scope of authority granted by you in the power of attorney. The law permits you, if you choose, to grant broad authority to an agent under power of attorney, including the ability to give away all of your property while you are alive or to substantially change how your property is distributed at your death. Before signing this document, you should seek the advice of an attorney at law to make sure you understand it.”
The law does not provide an agent with the authority to act as an agent under the power of attorney unless the agent has first affixed to the power of attorney an acknowledgement that includes the substantially the following
- “I shall act in accordance with the principal’s reasonable expectations to the extent actually known by me and, otherwise, in the principal’s best interest, act in good faith and act only within the scope of authority granted to me by the principal in the power of attorney.”
The new law requires the following of an agent that has accepted appointment:
- Act in accordance with the principal’s reasonable expectations to the extent actually known by the agent and, otherwise, in the principal’s best interest, act in good faith and act only within the scope of authority granted in the power of attorney;
- Keep the agent’s funds separate from the principal’s funds unless the funds were not kept separate as of the date of the execution of the power of attorney or the principal commingles the funds after the date of the execution of the power of attorney and the agent is the principal’s spouse;
- Act so as not to create a conflict of interest that impairs the agent’s ability to act impartially in the principal’s best interest;
- Act with the care, competence and diligence ordinarily exercised by agents in similar circumstances;
- Keep a record of all receipts, disbursements, and transactions made on behalf of the principal;
- Cooperate with a person who has authority to make health care decisions for the principal to carry out the principal’s reasonable expectations and, otherwise, act in the principal’s best interest; and
- Attempt to preserve the principal’s estate plan.
The law states that an agent under a power of attorney may do the following on behalf of the principal or with the principal’s property only if the power of attorney expressly grants the agent the authority:
- Create, amend, revoke or terminate an inter vivos trust;
- Make a gift;
- Create or change rights of survivorship;
- Create or change a beneficiary designation;
- Delegate authority granted under the power of attorney;
- Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan;
- Exercise fiduciary powers that the principal has authority to delegate; and
- Disclaim property, including a power of appointment.
Unless the power of attorney otherwise provides, the power to make limited gifts or other language in a power of attorney granting general authority with respect to gifts authorizes the agent only to:
- Make outright to or for the benefit of a person, a gift of any of the principal’s property; and
- Consent to the splitting of a gift made by the principal’s spouse in an amount per donee not to exceed the aggregate annual gift tax exclusions for both spouses.
Under the law, an agent may make a gift of the principal’s property only as the agent determines is consistent with the principal’s objectives if actually known by the agent and, if unknown, as the agent determines is consistent with the principal’s best interest based on all relevant factors including:
- The value and nature of the principal’s property;
- The principal’s foreseeable obligations and need for maintenance;
- Minimization of taxes, including income, estate, inheritance, generation-skipping transfer and gift taxes;
- Eligibility for a benefit, program or assistance under a statute or regulation; and
- The principal’s personal history of making or joining in making gifts.
Furthermore, the law states that a person may not be required to accept a power of attorney if any of the following applies:
- The person is not otherwise required to engage in a transaction with the principal in the same circumstances;
- Engaging in a transaction with the agent or the principle in the same circumstances would be inconsistent with any provisions of the law;
- Engaging in a transaction with the agent in the same circumstances would be inconsistent with any other law or regulation;
- The person has actual knowledge of the termination of the agent’s authority or of the power of attorney before exercise of the power;
- A request for a certification, a translation, an affidavit or an opinion of counsel under the law is refused;
- The person in good faith believes that the power of attorney is not valid or the agent does not have the authority to perform the act requested;
- The person makes a report to the local protective services agency, stating in good faith belief that the principal may be subject to physical or financial abuse, neglect, exploitation or abandonment by the agent; and
- The person has actual knowledge that another person has previously made a report to the local protective services agency.
Lastly, a power of attorney executed in or under the laws of another state or jurisdiction shall be valid in Pennsylvania if, when the power of attorney was executed, the execution complied with the law of the jurisdiction indicated in the power of attorney or the requirements for a military power of attorney.
About the Author:
Lee Greenberg, J.D. is Vice President and Regulatory Compliance Director at Bankers Advisory. Lee is a graduate of the University of Colorado at Boulder and earned his J.D. at the New England School of Law. He is admitted to the bar in Massachusetts. He can be reached at lee@bankersadvisory.com
Anna DeSimone founded Bankers Advisory in 1986 and is a nationally recognized authority in residential mortgage lending. She has received numerous industry awards and has authored more than 40 best practices guides and hundreds of articles.
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