Calling All Agents and Principals! The Pennsylvania Power of Attorney Statute Has Been Revised. Here’s What You Need to Know.

By Stephanie A. Henrick, Esquire

December 22, 2014

 

Act 95 has gone through a massive makeover. Liability for relying on a Power of Attorney has been limited. Penalties for refusing to accept a Power of Attorney have been put in place. Third parties have been given the ability to request additional information to support the validity and authenticity of the Power of Attorney. Language has changed. Execution requirements have been overhauled. Agents’ duties have been redefined. So what does this all mean? Do you have to revise your Power of Attorney now? Not necessarily.

The statute modifications do not invalidate a previously executed valid Power of Attorney. That being said, when there is a change in the law, I always recommend having your documents updated. Despite the new liability provisions for failure to accept a Power of Attorney, in my opinion, it is much easier and cheaper to revise a document than to file suit to obtain a court order mandating acceptance. At the very least, check your current Power of Attorney for an executed “Notice to Principal” (should be the first page) and executed Acknowledgments by your Agent(s) (should be the last page). If these are missing, check the date of execution, because your Power of Attorney may be invalid.

Modifications Effective July 2, 2014

There is now broad protection for banks and other third parties who in good faith accept a Power of Attorney without actual knowledge that a signature or mark are not genuine. The statute allows third parties and banks to request additional information before accepting a Power of Attorney, such as an Agent’s certification or opinion of counsel. Time limitations are imposed on these requests, as well as on the determination to accept the Power of Attorney.

Certain circumstances justify the refusal to accept a Power of Attorney. For instance, if a person has actual knowledge that the Agent’s authority has been terminated or that a Power of Attorney presented for acceptance has been revoked, then refusal is mandated.

Other circumstances justify civil liabilities, penalties and fees against banks and third parties who refuse to accept a Power of Attorney. You should be aware that these financial institutions and third parties are not allowed to require an additional or different form of the Power of Attorney. So, if you walk into the bank and present your mother’s valid, properly executed Power of Attorney, and you are told that the bank can’t accept it because they require their own form or a different format, etc., write that person’s name down! It is possible that the bank is acting illegally.

Modifications Effective January 1, 2015

The execution requirements now provide that the Principal’s signature must be witnessed by two individuals and notarized. In addition, if the Principal is unable to sign, he/she may specifically direct another individual to sign for him/her. The Agent cannot sign as a witness or notarize the Principal’s signature. Attorneys will no longer be able to acknowledge the Principal’s signature to a notary public.

The Notice has been modified to include language warning the Principal that the document may authorize the Agent to give away all of the Principal’s property or change designated beneficiaries. Therefore, it is extremely important for the Principal to understand what he/she is signing and to make sure that he/she is appointing a trustworthy Agent.

The Acknowledgment language has been modified to specify that the Agent shall act in accordance with the Principal’s reasonable expectations, in the Principal’s best interest, in good faith, and only within the scope of authority granted under the Power of Attorney. The Principal may now permit commingling of funds and may waive the Agent’s duty to keep accurate records and receipts. There are different reasons why a Principal may want to permit or waive these duties, which is why it is important to have these documents drawn up by an attorney who practices in estate planning, and not downloaded from the internet.

Some actions of the agent are limited unless the Power of Attorney specifically grants the authority to take these actions. A Principal may want their Agent to be able to change beneficiary designations on their retirement plans; however, unless this is stated in the Power of Attorney, the Agent’s powers are limited. In addition, some default duties may be modified or waived by the Principal (commingling funds, preserving the Principal’s estate plan, etc.).

Additional revisions to the statute include limits on an Agent’s liability, changes to definitions, and changes to the power to make “limited gifts”.

For more information about Powers of Attorney or other estate planning issues, please contact Stephanie A. Henrick or any member of our Estates Group at 610-275-0700.

The information above is general – we recommend that you consult an attorney regarding your specific circumstances. The content of this information is not meant to be considered as legal advice or a substitute for legal representation.