For Pennsylvania residents, power of attorney is a somewhat complicated topic. It can be difficult to think about–something associated with a time in which they could be physically or mentally unable to manage their own affairs. And while many prefer to think they will always be able to handle their finances and make decisions regarding health and legal issues, the reality is that the future is hard to predict. Physical or mental capacities can decline gradually, or they can be instantly reduced by a sudden event.
What is Power of Attorney?
A power of attorney (POA) is a legal document that allows someone (referred to as the “principal”) to name and authorize another person (referred to as the “agent”) to take care of legal, medical, and financial matters on their behalf.
There are a number of reasons that someone may choose to create a POA. One is convenience, for example giving an agent the power to sign off on financial transactions in far-away locations. In such cases, the POA may be temporary or limited to that act. More commonly, though, power of attorney becomes important in cases involving a mental or physical disability. The principal may be suffering from a coma following an accident, or advanced dementia, making it impossible to make financial and medical decisions themselves. In these cases, the POA would remain in effect for an extended period until the principal’s recovery or even permanently.
In Pennsylvania, if someone becomes unable to manage their affairs and has no power of attorney in place, the only way to get an agent is to petition the Court to appoint a guardian. This can result in the court choosing someone the principle would not have chosen themselves. This could lead to the agent making decisions that may or may not align with the principal’s wishes, which is why it is important to assign POA to someone sooner rather than later.
The first step in creating a power of attorney is choosing a trusted agent to handle affairs. The next step is determining the authority that the agent will have. There are different types of powers of attorney to be considered:
- Limited Power of Attorney. This gives an agent authority to act on the principal’s behalf for a very limited purpose, such as a real estate transaction, for a limited time specified in the document.
- General Power of Attorney. This is much broader in scope, giving the agent the same authority as the principal. That includes actions like signing documents, paying bills, and managing finances. The principal can terminate a general power of attorney whenever he or she wishes.
- Durable Power of Attorney. Durable power of attorney can be general or limited in the authority granted to the agent, but it includes a clause that keeps it in effect after the principal becomes incapacitated.
- Springing Power of Attorney. This is a POA that only goes into effect when the principal becomes incapacitated. Because of that condition, it is crucial that the document spells out the specific circumstances under which the POA will take effect.
Checking the Validity of Pennsylvania POAs Dated Before 2015
In 2015, the Pennsylvania General Assembly made revisions to the state power of attorney laws. These changes affect the parts of the law covering financial transactions. The law also added a requirement that the POA be signed in front of a notary and two adult witnesses, and that the agent also sign before a notary. The changes to the law also include revisions to the language protecting the principal from abuse of power, emphasizing significant powers given to the agent and barring the agent from taking certain actions not specified in the POA document.
Although the changes to the law do not invalidate POAs made prior to 2015, some private organizations (such as financial companies, investment firms, and banks) will not accept POAs created before the changes, so the enforceability of outdated documents can be an issue. Consider contacting a qualified Lancaster County attorney to update any power of attorney documents created prior to 2015.
Understanding the Duties of Power of Attorney Agents
One of the biggest changes to the Pennsylvania power of attorney law in 2015 was the “agent acknowledgement,” which defines the duties of the agent and the limits of what an agent can and cannot do. The agent is required to act generally in the best interests and toward the reasonable expectations of the principal. They must act in good faith and not outside the scope of powers granted in the POA. These duties are agreed to when the agent signs a POA document and the signature is notarized.
Post-2015, there are several things that agents cannot do without specific permission assigned in the power of attorney document. These include but are not limited to:
- Changing beneficiary designations;
- Making gifts;
- Creating or terminating trusts;
- Changing rights of survivorship;
- Delegating authority granted in the POA.
Furthermore, there are certain duties that agents must follow according to the new law unless the principal specifically waives them in the POA document. These include:
- Keeping their own funds separate from the principal’s;
- Keeping receipts and records of transactions made on the principal’s behalf;
- Attempting to preserve the principal’s estate plan.
Get Help With Power of Attorney Documents
In Pennsylvania, power of attorney documents are extremely powerful. They are a vital component of any estate plan. They are also complex legal documents, and it can be difficult to make one without understanding the laws around them. As such, Lancaster County residents should consult an experienced attorney whenever they want to write, review, or revise a POA document. Contact the offices of Going and Plank in downtown Lancaster to ensure that POAs meet the requirements of the law and will have their desired outcome.
Want to read more about estate planning and Power of Attorney? Check out these articles by Going and Plank:
Do You Have Your Will and Estate Plans in Place?