Happy New Year!
Effective January 1, 2015, under Act 95, Pennsylvania modified Chapter 56 of Title 20 of the Pennsylvania Consolidated Statutes, which deals with Powers of Attorney. The amendment was made to try to better protect the Grantor of the powers.
Under the new statute, a Pennsylvania Power of Attorney must be witnessed by two witnesses and a notary to be valid. Also, the warning statement that the Grantor must sign at the beginning of the Power of Attorney was also modified slightly so that the Grantor better acknowledges the power he or she is potentially giving to the Agent.
The new law also creates some mandatory duties on the Agent that the principal cannot waive or modify.
These three requirements are that the agent must:
- act in accordance with the principal’s reasonable expectations to the extent actually known by the agent, and otherwise in the principal’s best interests;
- act in good faith; and
- act only within the scope of authority granted in the power of attorney.
Furthermore, under the new law, unless the document says otherwise, an Agent must also:
- Keep his 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 to the extent actually known by the agent and, otherwise, act in the principal’s best interest.
- Attempt to preserve the principal’s estate plan, to the extent actually known by the agent, if preserving the plan 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.
Finally, Section 5601.4(a) limits the power of an agent to take certain actions unless the authority is expressly granted in the POA and is not prohibited by another instrument. The major powers and actions that must be specifically authorized are:
- Create, amend, revoke or terminate an inter vivos
trust other than as permitted under section 5602(a)(2), (3) and (7) (relating to form of power of attorney).
- Make a gift.
- 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.
- Disclaim property, including a power of appointment.
Section 5601.4(b) further limits the exercise of hot power authority by agents who are not in certain family relationship with the principal. However, a Power of Attorney can be written to specifically opt out of these limitations.