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.

In Bizzare Case Before PA Supreme Court, Beneficiaries Sue the Register of Wills

Consider the case of Andre Leonti, a man who died Fayette County PA without a will. The hospital refused to release his body to his lifelong  friend, Cheryl Keefer, until she produced evidence of her authority to administer his estate. She had no luck with the Fayette County Register of Wills, who would not appoint her administrator because she could not establish that she was next of kin. So she next petitioned to the Orphans Court to be appointed administrator of the estate so she could arrange a funeral and burial for her friend, and use money from his estate to pay for the service. Although Cheryl held a power of attorney for Mr. Leonti, that expired upon his death. The court ordered the Register of Wills to appoint her administrator of the Andre’s estate and ordered the hospital to release the body to her for burial. Andre’s estate was worth about $ 242,000.  Normally the Register of Wills would require Ms. Keefer to post a bond before administering the estate, but the court order did not mention any bond requirements.

 As often happens, a distant cousin of the decedent living in Texas became aware of his possible inheritance, so he sought to have Cheryl Keefer removed as administrator and the estate, and he appointed in her place. Ms. Keefer not only refused to turn over the assets, but she also disappeared. Undaunted by this setback, the distant cousin sued the Register of Wills for failing to obtain the bond. 

Normally a government employee is exempt from suit under the doctrine of “governmental immunity,” and the Register of Wills of Fayette County thought so, too. The Pennsylvania Supreme Court held otherwise and stated that the Register of Wills of Fayette County might be liable because of a special Pennsylvania statute governing when the Register of Wills must require a bond, and they sent the case back down to the lower court for more fact finding. 

If you are appointed to administer an estate, do you need to obtain a bond? Would you qualify for a bond? Most wills contain a boilerplate provision stating the executor (also known as the “personal representative”) need not file a bond.  It is there because of  a Pennsylvania Law, similar to the laws of other states,which direct the Register of Wills to obtain a bond from a personal representative, unless waived in the will. The law, contained in Title 20 Pa. C.S.A. Section 3171 to 3175,  is too complicated to discuss in detail, but in most cases, an out of state personal representative must obtain a bond before they can administer an estate. Since they will control the checkbook, and have access to all of the funds of the estate, the bond is intended to secure faithful performance of their duties.  A bond can usually be obtained from an insurance company and most attorneys who do estate work, such as our firm, have access to companies who issue bonds. 

The case brings up a more fundamental question for anyone who drafts a will. Should you require that the representative obtain a bond? It is not impossible to purchase a bond, and it may protect your heirs. It would be pointless if the person you appoint as your personal representative is also your sole beneficiary, but it would make sense if your personal representative is a personal friend, yet not an heir of your estate. 

Without a will, there is no choice in the decision at all, and the laws stated above control. Was Cheryl Keefer a close friend of the decedent who was shortchanged because the decedent did not leave a will? She was appointed his agent under his power of attorney, and she seemed to be the only person interested in arranging decedent’s funeral, since his relatives only stepped forward when they found there was money to be claimed. Or, was she a neighbor who saw an opportunity to convince the decedent to appoint her agent under his power of attorney, and later pocket the decedent’s money by opening up an estate in his name and getting appointed administrator? We do not know enough to decide either wasy, but the case illustrates the importance of having a will.  

Have you ever had experience with getting a bond? If so, comment below.

Stay will until the next post.

Bob Gasparro