By: Sebring Law
The recent statutory changes to Powers of Attorney (“POA”) created in Pennsylvania started as a response to the Pennsylvania Supreme Court’s holding in Vine v. Commonwealth, 9 A.3d 1150 (PA. 2010). (Where a husband forged his comatose wife’s mark on a Power of Attorney and used the forged Power of Attorney to change her retirement options. As a result of her husband’s changes to her retirement plan while acting as her Agent, she was not eligible to receive disability payments after she regained consciousness.) The Pennsylvania Supreme Court ruled the Pennsylvania Estates and Fiduciaries Code (“PEF Code”) provided immunity from liability ONLY when the agent is acting under a power of attorney. Since the power of attorney in the Vine case was invalid, there was no immunity protection under the PEF Code and the wife’s retirement benefits had to be adjusted to reflect as if they were never changed. As a result of the Vine decision, there was a lot of concern that third parties (usually banks and financial institutions) would reject routine and properly executed powers of Attorney out of concern for the third-party’s financial liability in the event the agent acted improperly.
As a result of the concerns raised from the Vine decision, the various sections of the PEF Code were amended by the Pennsylvania legislature. Certain sections were made effective immediately (July 2014), which are detailed as follows:
- Agents must act in good faith when acting on behalf of the Principal (§5601(f)).
- Banks and financial institutions must accept a POA or request an affidavit from the Agent that the POA is still valid within seven (7) days of receipt of the POA (§5608). This provides broad protection to banks and financial institutions and 3rd parties who in good faith accept a POA without actual knowledge that a signature or mark are not genuine.
- Banks and financial institutions must have a substantial basis to need more information regarding the validity of the POA (§5608.1).
In addition, as of January 1, 2015, the following changes are necessary for all Powers of Attorneys executed AFTER January 1, 2015:
- Execution: The signing of the POA must be witnessed by two (2) individuals (in addition to the notary) who are neither the Agent nor the Principal (§5601(b)).
- Notice: Additional language must be added to the Notice page to reflect that the Agent is to act pursuant to the Principal’s reasonable expectations (§5601(c)).
- Acknowledgement: The Acknowledgment language was changed and an Agent will not have authority to act unless the new language is added to the Acknowledgment page (stating that the Agent will act in accordance with the Principal’s reasonable expectations and act in good faith) and the Acknowledgment page is signed by the Agent (§5601(d).
- Agent’s duties and powers:
- The various duties of the Agent listed in §5601.3(a) cannot be waived. The duties include, inter alia, keeping the Agent’s funds separate from the Principal’s funds, keeping records, preserving the Principal’s estate plan, etc.
- Section 5601.3(c) outlines the limitations on the liability of an Agent that acts in good faith.
- Section 5601.4 lists the powers that must be specifically granted by the Principal in the POA in order for the Agent to have such powers (ex. Agent’s powers to make gifts, etc.).
For more information regarding the recent changes to Pennsylvania’s Power of Attorney statute, or any other estate planning matter, please contact either Brenda B. Sebring, Esq. at (412) 856-3500 for a one-on-one discussion of your estate planning needs.
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