Restructuring Pennsylvania’s Powers Of Attorney

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Analysis

 In response to the Pennsylvania Supreme Court’s decision in Vine v. Commonwealth of Pennsylvania, State Employees’ Retirement Board,607 Pa. 648; 9 A.3d 1150 (2010), the Pennsylvania legislature made significant amendments to Pennsylvania’s Powers of Attorney (POA) that involve financial and property transactions. While some of the amendments took effect upon passing, many of them went into effect January 1, 2015. Several of these changes dealt with how POAs are executed, the duties required of an agent, the agent’s potential liability, the agent’s ability to make gifts, and protections afforded to third parties who rely in good faith upon POAs.

As a result of the amendments, POAs must now be witnessed by two individuals. These individuals cannot be the agent or the person directed to sign on behalf of the principal. POAs must be notarized by a notary. The notice requirement must be signed by the principal. The notice form has been modified to inform the principal that by granting the powers, the agent has the authority to control the principal’s property. The principal is also encouraged to seek the advice of an attorney prior to executing the POA. The acknowledgment form has also been changed to inform the agent that he must act in the best interest of the principal and in accordance with the principal’s reasonable expectations to the extent known by the agent. Also, the agent must act in good faith and within the scope of the powers given to the agent. The amendments also provide that when an agent acts in good faith and in the best interest of the principal, the agent is afforded liability protection. The amendments provide that an agent shall not be liable to the principal for any decrease in the value in the principal’s property provided there is no breach of duty.

The changes also impact a third party’s right to rely upn POAs. The changes provide greater protection for the good faith reliance upon a POA. Third parties that now rely upon a POA are protected from liablity should it be later determined that the POA was not valid, provided the third party acted in good faith. This protection does not apply if the third party acts in bad faith or has actual knowledge that the POA is not valid. In determing whether the POA is valid, a third party may request that the agent sign a certification. Also, a third party may request an attorney’s opinion as to whether the agent is acting within the scope of powers given to him by the principal. However, the new changes place a time limit on the third party’s ability to seek additonal confirmation. The amendments also provide for remdies should a third party wrongfully reject a POA.

What It Means to You

A POA is a critical part of an estate plan. When executing a POA as well as other estate documents, it is important to seek the advice of an attorney. A properly drafted POA can significantly help in responding to financial situations should the principal become disabled or unable to act. Without a POA, the disabled person’s family may have to petition the court for guardianship, which can be expensive and time consuming, and cause unneeded stress to loved ones. It is also crucial to select an agent who knows your expectations and is willing to act on your behalf and undertake the required duties, as well as be willing to act in your best interest.

Journal Edition

March 2015
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