Bulletin: PA2014007

Dear Associates:

On July 2, 2014, Governor Corbett signed into law Act 95 of 2014 which contains broad revision to Title 20, Chapter 56 of the Pennsylvania Consolidated Statues governing powers of attorney. Act 95 makes a number of changes to the form and effect of powers of attorney.

Execution Modifications - Effective January 1, 2015:

The revised statute under § 5601 (b) (1) requires that a power of attorney (POA) be signed and dated by the Principal; § 5601 (3) (i) requires that the signature of the Principal be acknowledged by a notary (the notary may not be the Agent designated by the POA); § 5601 (3) (ii) requires that the POA be witnessed by two adult individuals; witnesses may not be the Agent or notary.

Changes to the Notice to Principal and Acknowledgment of Agent - Effective January 1, 2015:

The existing statute requires that a specific Notice, signed by the Principal, be included at the beginning of a POA and that a specific Acknowledgment form, signed by the Agent, be attached to the POA.  

The revised statute has made changes to both the Notice and the Acknowledgment. Both the Notice and Acknowledgment now contain statements explicitly specifying that an Agent must act in accordance with the Principal’s reasonable expectations, in the Principal’s best interest, in good faith, and within the scope of the authority granted under the POA.

The Notice also contains language conceding that the law allows for broad authority to be exercised by an Agent appointed in a POA; possibly including the power to give away all of the property during the Principal’s life or substantially change how it is distributed upon the Principals death. The revised Notice and Acknowledgment forms are attached as Exhibit A and Exhibit B.

Specific and General Grants of Authority - Effective January 1, 2015:

Section 5601.4(a) requires a POA to explicitly authorize certain Agent actions related to estate planning, including:

1. Create, amend, revoke, or terminate an inter vivos trust;
2. Make a gift;
3. Create or change rights of survivorship;
4. Create or change a beneficiary designation;
5. Delegate authority under the POA;
6. Waive the Principal’s right to be a beneficiary of a joint and survivor annuity;
7. Exercise fiduciary powers that the Principal has authority to delegate;
8. Disclaim property, including a power of appointment.

Limitation of Third Party Liability - Effective July 2, 2014:

Act 95 reversed the Pennsylvania Supreme Court decision in Vine v. Commonwealth State Employees’ Retirement Board. Effective as of the signing of Act 95 (July 2, 2014), § 5608 now provides broad protection for corporate entities, banks  and other third parties who in good faith accept a POA as valid.

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EXHIBIT A

 NOTICE

THE PURPOSE OF THIS POWER OF ATTORNEY IS TO GIVE THE PERSON YOU DESIGNATE (YOUR "AGENT") BROAD POWERS TO HANDLE YOUR PROPERTY, WHICH MAY INCLUDE POWERS TO SELL OR OTHERWISE DISPOSE OF ANY REAL OR PERSONAL PROPERTY WITHOUT ADVANCE NOTICE TO YOU OR APPROVAL BY YOU.

THIS POWER OF ATTORNEY DOES NOT IMPOSE A DUTY ON YOUR AGENT TO EXERCISE GRANTED POWERS, BUT WHEN POWERS ARE EXERCISED, YOUR AGENT MUST USE DUE CARE TO ACT FOR YOUR BENEFIT AND IN ACCORDANCE WITH THIS POWER OF ATTORNEY.

YOUR AGENT MAY EXERCISE THE POWERS GIVEN HERE THROUGHOUT YOUR LIFETIME, EVEN AFTER YOU BECOME INCAPACITATED, UNLESS YOU EXPRESSLY LIMIT THE DURATION OF THESE POWERS OR YOU REVOKE THESE POWERS OR A COURT ACTING ON YOUR BEHALF TERMINATES YOUR AGENT’S AUTHORITY.

YOUR AGENT MUST ACT IN ACCORDANCE WITH YOUR REASONABLE EXPECTATIONS TO THE EXTENT ACTUALLY KNOWN BY YOUR AGENT AND, OTHERWISE, IN YOUR BEST INTEREST, ACT IN GOOD FAITH AND ACT ONLY WITHIN THE SCOPE OF AUTHORITY GRANTED BY YOU IN THE POWER OF ATTORNEY.

THE LAW PERMITS YOU, IF YOU CHOOSE, TO GRANT BROAD AUTHORITY TO AN AGENT UNDER POWER OF ATTORNEY, INCLUDING THE ABILITY TO GIVE AWAY ALL OF YOUR PROPERTY WHILE YOU ARE ALIVE OR TO SUBSTANTIALLY CHANGE HOW YOUR PROPERTY IS DISTRIBUTED AT YOUR DEATH. BEFORE SIGNING THIS DOCUMENT, YOU SHOULD SEEK THE ADVICE OF AN ATTORNEY AT LAW TO MAKE SURE YOU UNDERSTAND IT.

A COURT CAN TAKE AWAY THE POWERS OF YOUR AGENT IF IT FINDS YOUR AGENT IS NOT ACTING PROPERLY.

THE POWERS AND DUTIES OF AN AGENT UNDER POWER OF ATTORNEY ARE EXPLAINED MORE FULLY IN 20 Pa.C.S. CHAPTER 56.

IF THERE IS ANYTHING ABOUT THIS FORM THAT YOU DO NOT UNDERSTAND, YOU SHOULD ASK A LAWYER OF YOUR OWN CHOOSING TO EXPLAIN IT TO YOU.

I HAVE READ OR HAD EXPLAINED TO ME THIS NOTICE AND I UNDERSTAND ITS CONTENTS.

_______________________                                                                   ________________
(Principal)                                                                                             (Date)

EXHIBIT B

ACKNOWLEDGMENT

I,______________________________, HAVE READ THE ATTACHED POWER OF ATTORNEY AND AM THE PERSON IDENTIFIED AS THE AGENT FOR THE PRINCIPAL.  I HEREBY ACKNOWLEDGE THAT WHEN I ACT AS AGENT:

I SHALL ACT IN ACCORDANCE WITH THE PRINCIPAL’S REASONABLE EXPECTATIONS TO THE EXTENT ACTUALLY KNOWN BY ME AND, OTHERWISE, IN THE PRINCIPAL’S BEST INTEREST, ACT IN GOOD FAITH AND ACT ONLY WITHIN THE SCOPE OF AUTHORITY GRANTED TO ME BY THE PRINCIPAL IN THE POWER OF ATTORNEY

_____________________                                                      ___________________
(Agent)                                                                                (Date)