Wednesday, January 14, 2015

Changes to Pennsylvania’s Power of Attorney Law – What you need to know for the New Year

On January 1, 2015, significant changes went into effect for Power of Attorney documents drafted in Pennsylvania. For anyone who deals with these documents in any capacity, it is important to know that these changes are coming and what impact they will have.  

To give a brief history on this, on July 2, 2014, Governor Tom Corbett signed into law as part of Act 95 of 2014, House Bill 1429, provisions creating changes to Chapter 56 of the Decedents, Estates and Fiduciaries Code, which are the laws that govern Powers of Attorney in Pennsylvania. These changes were made in response to several events; in particular, to overturn the Pennsylvania Supreme Court’s decision in Commonwealth v. Vine, 9 A.3d 1150 (2010) through the legislative process.

 In the Vine matter, a wife executed a Power of Attorney (POA) giving her husband authority to act on her behalf. The husband used the POA to make changes to his wife’s State Employees Retirement System (SERS) account. Several years after the couple divorced, the wife discovered that her husband made changes to her retirement account and confronted SERS. She claimed that she was incapacitated when she signed the POA, and argued that SERS was not able to rely on the authority the POA conveyed to her husband. All the parties agreed that the POA was invalid; however, both the SERS dispute board and the Commonwealth Court agreed that under the language of the POA law, SERS could not be liable, because it relied in good faith on the POA that it believed was valid at the time. 

The Pennsylvania Supreme Court heard the case and reversed the Commonwealth Court’s decision. It held that since the POA was not valid, the liability protection under the POA law at the time did not apply to SERS.

This decision essentially put any agent acting under a POA in the impossible position where he or she would have to prove the competency of the principal any time they would present the POA to a third party. Therefore, the Pennsylvania legislature stepped in and changed the law to in an attempt to solve this, and other problems, with the then-current Power of Attorney law.

Revisions to the law provide that if a third party, in good faith, accepts a power of attorney without actual knowledge of the power of attorney being void, invalid, terminated, or that the agent is exceeding or improperly exercising his or her authority, that third party will not be subject to civil liability. Please note that this section actually went into effect when Governor Corbett signed HB 1429 into law. 

In addition, it is important to know that while these changes create third party immunity from civil liability, they also provide for sanctions to a third party who refuses to accept a proper power of attorney. As a third party, if an agent presents a power of attorney to you, you are entitled to ask for the agent’s certification under penalty of perjury, a translation (if it is in another language), and an opinion of counsel as to whether the agent is acting within the given scope of authority. Then, the third party has 7 business days after presentation of the POA to accept it, or request an affidavit, certification, translation, or opinion of counsel; and then has 5 business days to accept after receipt of additional requested information (or provide a “substantial basis” for making an additional request). If the third party refuses to accept a POA and does not meet any of these conditions, then the law states that the third party shall be subject to civil liability for “pecuniary harm to the economic interests of the principal proximately caused by the person’s refusal to comply with the instructions of the agent… and a Court Order mandating acceptance of the POA.” 20 Pa.C.S. 5608(3).  

In addition to potential sanctions, the revisions of the law explicitly provide that a third party cannot require different or additional forms. As an Estate Planning practitioner, I have seen on a number of occasions institutions refusing to honor a POA on the basis that they would only accept POAs on their institution’s form. This was not only frustrating for the principal who thought he or she was planning ahead by having a properly drafted and executed POA, but also to the agent, who was just trying to take care of the principal. From my perspective, this is a welcome revision.

There are other revisions in the requirements for drafting and executing POAs, but the greatest impact will probably be seen with the requirement of 8 powers for which a principal must specifically grant authority, which are as follows: 1. Create, amend, revoke, or terminate an inter vivos trust; 2. Making gifts; 3. Create or change rights of survivorship; 4. Create or change a beneficiary designation; 5. Delegate authority granted under the POA; 6. Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan; 7. Exercise fiduciary powers that the principal has authority to delegate; and 8. Disclaim property. Since these powers need to be specifically granted, during the drafting process, principals will be forced to carefully consider what exactly they want their agent(s) to have the ability to do. Quite frankly, no principal should ever sign a power of attorney without carefully considering and understanding what type of authority it grants to another.

If you have any questions about a Pennsylvania Power of Attorney, whether you are a third party being asked to honor one, or you are trying to complete your estate plan, or you are an agent trying to act on behalf of a principal, you should consult with legal counsel. 

Jessica R. Grater, Esquire, is an attorney with the law firm of Wolf, Baldwin & Associates, P.C., with offices in Pottstown, West Chester, and Reading. Ms. Grater concentrates her practice in Wills, Estates, Probate, Orphans’ Court, and Social Security Disability, and litigation related to such matters. She may be reached at 610-323-7436 or by e-mail to