Survey of Significant Changes in PA Power of Attorney Law

As we've discussed before, the Pennsylvania POA law was changed in July 2014. Some of the changes became effective immediately while other provisions went into effect on January 1, 2015. If you have a power of attorney drafted before the change it is still valid, so long as valid when drafted. Some sections of the new law may affect the manner in which it is used however.

A power of attorney form is a document that allows another individual to make decisions on your behalf if you lose mental capacity or are unable to act. The person executing the document is the "principal" and the person appointed is the "agent." A person to whom the POA is presented is called a "third party" and examples are banks, landlords, utility companies, nursing homes, etc.  In Pennsylvania it is assumed that all POA documents are durable (unaffected by subsequent incapacity of principal) and so it is helpful, but not necessary to designate them as such. Also, a POA expires upon the death of the maker. Although an agent under a POA loses authority at that point, the personal representative named in a will takes over.

The changes in the law were instituted to curtain abuses in use of the documents, and as a result of recent Pennsylvania Supreme Court decision. The issue before the court was what happens if someone relies on a POA document and it is later shown that the principal who signed it was not mentally competent to sign the form, or if it later turns out the form was forged. Is a third party liable for relying on the form, even if they did so in good faith?  The Pennsylvania Supreme Court said that yes, the third party could be held liable for relying on a forged form, or one in which the person did not have the capacity to sign. The new law tries to mitigate that problem and reverse that holding by changes in the law.

These are some of the changes:

First, now every POA document must be signed before a notary and two independent witnesses. That should not be a problem for any of our clients because we, and most other lawyers, have always done that. Even before the new law, this was done to expedite land transfers where notarization and witnesses are required, or in case the POA was used in another state where notarization was required.

Second, The first page of the POA has a new statutory "notice" which must be capital letters and must be signed by the principal  The agent must also sign an acknowledgement which has been updated. The notices and acknowledgements that were valid under the old law are still valid today and do not have to be changed.

Third, The agent now has three mandatory duties while acting under a POA: they must act in good faith; they must act only within the scope of authority granted in the POA, and they must act in accordance with the principal's reasonable expectations if known, or in the principal's best interests if they are not known.The statute imposes additional duties on the agent concerning comingling of funds and record keeping, many of which can be modified in the document itself. However, an agent must keep books and records of all the transactions and acts they perform for the principal and they must be made available on 30 days notice from a court, the local agency on aging who obtains a court order for the records, or anyone holding a fiduciary relationship to the principal. This provision of the law when into effect January 1, 2015 regardless of when the document was signed. It is important that anyone serving as agent have records kept on an accounting program, a spreadsheet, or in a journal and ledger. We are willing to assist in this important obligation.

Fourth. Any third party presented with a POA may now request (i) an agent's written certification regarding factual matters concerning either the principal, the agent, or the POA form itself; (ii) they may request an English translation of any POA in another language; (iii)  if there is any articulable reason for suspicion, they may request a legal opinion confirming that the agent is acting within the scope of authority granted in the POA.  If this request is made within seven days of presentation the agent under the POA must bear the cost of obtaining the legal opinion. In most cases the third party has an additional five days to act after receiving the requested information. Although we currently provide this service free for documents drafted in our office, a disturbing feature of this new law is that a third party can delay acceptance of the POA for up to 12 days by requesting the additional documentation. On the other hand, if the delay is unfounded, the third party may be subject to civil liability.

Fifth, A third-party may be immune from liability if they accept a POA in good faith, without any actual knowledge of it being void or deficient. This is a direct reversal of the Supreme Court decision.

Under the old law anyone who might inherit from the estate could file a petition for an accounting from the agent if they felt the agent was abusing his or her power. That right is removed under the new law, but the personal representative of the estate may request an accounting after the death of the principal. In all documents drafted in our office we specifically designate ourselves as a fiduciary who can demand an accounting from an agent if there is an articulable reason to suspect abuse. Some, but not all, attorneys do the same and there may be others in a fiduciary capacity who can request an accounting.

If  you have any questions about the new law please do not hesitate to call our office. Although it is not necessary that you do so, we are willing to update any POA forms drafted under the old law for a nominal fee. We will continue to provide an opinion of counsel for any document we've drafted, free of charge.

Can You Vote as a Guardian or Agent Under a Power Of Attorney?

People often ask: "I am agent under my father's Power of Attorney. I know exactly how he would want to vote at the next election, may I vote for him?"

The simple answer to this question is "no." An agent's authority under a power of attorney is defined by statute in Title 20, Chapter 56, and voting in a government election is not one of those powers.. The power to vote in corporate elections is often granted, but it does not extend to governmental elections. Neither may a guardian vote for their ward.

However, you may transport your ward to the polls so they can vote. If they cannot travel to the polls, you may order an absentee ballot for them.

Another different, but related question, is whether someone who has been found incompetent after an adjudication in a guardianship proceeding, or pursuant to the terms of a springing power of attorney, may vote.

The law says that everyone is deemed to be competent until there has been a finding of incompetency. Someone who is demented,yet not formally determined to be incompetent, is still presumed competent. Furthermore, the distinction between competency and incompetency is not static; many people drift between the two depending on the time of day or other environmental conditions.

Even as to persons found to be incompetent, there is a constitutional right to vote. Because the right to vote is fundamental and preserves other basic civil and political rights, it has protections under the Due Process Clause of our nation's constitution. A state must provide an adequate notice and hearing to an incapacitated person before revoking the right to vote. While most states have laws that determine whether an incapacitated person may vote, Pennsylvania is one of the thirteen states that are completely silent on the issue.

This topic was addressed and the current law exhaustively reviewed in the most recent Journal of the National Academy of  Elder Law Attorneys. If you would like a copy of the article, please contact our office.

Finally, the last date to obtain an absentee ballot in Pennsylvania for the upcoming election in November, is October 28, 2014. 

Big Changes Coming to Pennsylvania Power of Attorney Laws.

Big changes are underway for anyone employing a Pennsylvania Power of Attorney document in Pennsylvania. Act No. 95, signed by the governor on July 2, 2014, is designed to curtail abuses by agents acting under a power of attorney, as well as allow some flexibility in the agent’s services to the principal. This new legislation applies to financial power of attorney documents only. Advance health care directives or mental health power of attorney documents are not affected. 

This legislation was the culmination of three years of work and negotiation by several groups including the Pennsylvania Association of Elder Law Attorneys (A division of the National Academy of Elder Law Attorneys), Pennsylvania Bar Association, the Joint State Government Commission, and the staff of Pennsylvania Senator Greenleaf and Representative Keller. 

The changes fall into three categories: 1. Changes in the form itself; 2. Changes in the agent’s duties; 3. Changes in the powers an agent may exercise under Pennsylvania laws. Some changes take effect immediately,  others will be implemented on January 1, 2015. 

Changes to the form itself:  Every power of attorney document must now be notarized and signed by two witnesses. The affidavits that accompany the document are also modified to provide a more explicit warning to the principal. For example, the principal is warned that the agent may have the power to give away all his property, or even change how his property is distributed upon death. A new mandated clause suggests that the principal should seek the advice of an attorney at law before signing the document.The acknowledgement for that the agent signs is also modified to direct the agent to act according to the principal’s reasonable expectations to the extent they are known, otherwise in the principal’s best interest. This change is important to elder law attorneys who may have to work with an agent to qualify a principal for Medicaid, VA benefits or some other program. Many times a principal will neither plan for, nor expect that her entire estate will be depleted by nursing  home costs when drafting the original document.  

The new law specifically provides that in most cases, a photocopy or electronically transmitted copy of a power of attorney shall have the same force as the original. Prior to this change in the law, the agent could be forced to produce the original unless the document itself stated that photocopies could be used in lieu of the original. 

Changes in the agent’s duties:  In return for increased immunity to anyone who relies on an agent acting under a power of attorney, outside parties may now demand more of an agent. Any outsider who can articulate a specific reason to suspect the authenticity of the document, or the power of the agent to perform the transactions taking place, may request from the agent an opinion of counsel that the document is legal and the agent is acting legally.The cost of obtaining that opinion is born in most cases by the agent. 

An agent must now keep records of all receipts and disbursements on behalf of the principal. The agent must produce financial records within 30 days if called upon by a court, or by the executor of the estate of the principal, or a guardian, governmental agency or any other fiduciary acting for the principal. 

An agent is still entitled to compensation for her duties under certain conditions. Any outside party who without good cause refuses to accept a power of attorney, is liable for civil damages, including the loss in the value of the principal’s property, proximately caused by the refusal to comply with the instructions of the agent. 

Changes in the powers an agent may exercise:  The new law contains a list of actions that cannot be taken by an agent unless those powers are expressly granted in the power of attorney document. Included in the list are the powers to make gifts; create, amend or revoke some trusts; delegate authority; disclaim property rights; and other powers too numerous to mention here. In the case of making gifts, there are additional limitations in a new section which redefines those powers. Under the new law, the agent cannot take any action which would create a conflict of interest between her and the principal, including saving funds so the agent receives a lager inheritance from the principal. The agent must expend funds necessary for another agent to act under an advance medical directive executed by the principal. So, if the agent under the advance medical directive needs funds to arrange for a copy of medical records or to hire a geriatric care manager or any similar medical need, the agent under the financial power of attorney must comply with that request. 

This is not a complete review of the new law, and additional articles will follow. If you have any questions, add them to the comments and I would be happy to answer them.

Correction, 7/14/14. Previous editions of this post indicated the law was still on the governor's desk. In fact, the legislation was signed into law on July 2, 2014 as Act 95. It modifies the existing law, and is incorporated in Title 20, Sections 5601 - 5611.

Stay well until the next post:

Bob Gasparro, Esq.

robert.gasparro@lifespanlegal.com