On July 2, 2014, the Governor signed Act 95 into law amending Title 20 of Pennsylvania Consolidated Statutes (20 Pa. C.S. §5601-5612) regulating Powers of Attorneys (“POAs”). These recent revisions do not affect the validity or enforceability of a POA properly signed under prior law; they remain valid. However, a POA made after January 1, 2015, must comply with the amendments. Among the more significant changes are those that affect:
- The execution of a POA;
- The Agent’s duties; and
- The liability of an Agent, the powers of an Agent, and third party liability
Execution of POAs
A POA made after January 1, 2015, must be notarized and must contain signatures of two, disinterested witnesses. The Act makes clear that the Agent cannot be the notary and the witnesses also cannot be the notary or the Agent. A POA may be signed by another person for the Principal (the person making the POA) if the Principal is unable to sign and directs the other individual to sign on his or her behalf. See 20 Pa. C.S. §5061(b)(1).
Under prior law, all POAs had to contain a Notice provision. The revisions change the form of Notice requiring two new statements. These statements relate to the Agent’s duty to act in accordance with the Principal’s reasonable expectations and in the Principal’s best interest and put the Principal on Notice concerning the broad powers that a POA may give to the Agent. Like the prior law, the Agent’s Acknowledgment requires the Agent to acknowledge that he or she will act consistent with the Principal’s reasonable expectations and best interest and in good faith within the scope of powers granted by the Principal in the Power of Attorney.
The revisions make clear that the Agent has a legal obligation to act in accordance with the Principal’s reasonable expectations and in the Principal’s best interest. See 20 Pa. C.S. §5601.3. These duties are mandatory and may not be waived by the Principal in the Power of Attorney.
Concerning the Agent’s liability, give the Agent protection if the Agent is acting in good faith. Further, the amendments specifically allow the Agent to benefit from a transaction entered into on behalf of the Principal if the Agent is acting in good faith and in accordance with the Principal’s reasonable expectations and best interest. Effective January 1, 2015, the Agent is not required to provide an accounting as an Agent unless ordered by a court or unless the Principal or the Principal’s guardian or agency charged with protecting the welfare of the Principal requests such an accounting. The language in the revisions do not specifically authorize a spouse or other relative or a presumptive beneficiary to demand an accounting.
Powers of an Agent
The new statutory provisions delineate which powers must be set out expressly in the POA. These include the powers to create, amend or terminate a living trust, to make a gift and to disclaim property. These powers are not assumed under a broad grant of power. Instead, the POA itself must include these powers in order that the Agent can exercise them. See 20 Pa. C.S. §5601.4.
Third Party Liability
In 2010, the Pennsylvania Supreme Court decided Vine v. Commonwealth of PA, State Employee’s Retirement Board, 607 Pa. 648, 9 A.3d 1150 (2010). There, the court held that the State Employee’s Retirement Board was liable for relying on what appeared to be actions undertaken by an Agent pursuant to a POA that appeared valid on its face but became null and void because of the Principal’s lack of capacity at the time of its execution. The court held in effect that even though the POA was properly executed and not revoked, a third party acting in good faith was nevertheless responsible for the actions of the Agent taken by the Agent because the Principal lacked the capacity to give a POA even though such a third party could not reasonably tell from the face of the document that the POA was void. This decision had the practical effect of making many third parties reluctant to accept POAs.
The new law effectively repeals the holding of Vine. The amendments give immunity to third persons who act in good faith reliance upon a POA even if the POA is later found to be void or revoked provided that the third party has no actual knowledge that the POA is void or has been revoked.
Although the changes in the law do not affect the validity of POAs executed prior to January 1, 2015, Principals who have made POAs or Agents who hold them should request their attorneys to review the POAs especially with regard to the scope of the Agent’s powers that must now be explicitly set forth in the POA itself.
Contact us if you are unsure about the validity of any previous Power of Attorney in Pennsylvania.