In another article, I look at the benefits of a power of attorney. After all, it's an easy way to give someone else (your "Agent") the power to act on your behalf in the event you become disabled. In second article, however, I was careful to warn of the problems that arise if you give power of attorney to the wrong person. It seems that I wasn't the only one concerned about these pitfalls. Pennsylvania Governor Ridge was concerned as well. In an attempt to alleviate these problems, the Governor Ridge recently signed legislation that revises Pennsylvania's law dealing with powers of attorney.

While the new law makes a number of changes, the most significant requires all powers of attorney to begin with a warning notice in capital letters. The notice is designed to make it clear that the power of attorney is an extremely powerful document. It reminds us that the power of attorney is not a simple form. The warning notice cautions you that the purpose of the power of attorney is to give the person you designate (your "Agent") broad powers to handle your property, including the power to sell your property without notice to you. The notice goes on to explain the other basic rules that apply to a power of attorney. This notice must be included on all Pennsylvania powers of attorney signed after April 11, 2000. Prior to the passage of this new law, powers of attorney made in Pennsylvania did not require such a warning notice.

Another change under the new law is a requirement that the Agent sign a special form acknowledging certain responsibilities. This is intended to keep your Agent from abusing his or her authority under the power of attorney. Under this new rule, an Agent has no power to act until they sign this special acknowledgment. By signing, the Agent agrees they will exercise the powers for your benefit. They also agree to keep your assets separate from their own, and they agree to keep full and accurate records of all actions they take on your behalf. While many lawyers believe these duties existed under the old law, the new law removes all doubt, and requires the Agent to essentially take an oath before they assume any authority under the power of attorney. Like the warning notice, this requirement also applies to Pennsylvania powers of attorney signed after April 11, 2000. It is important to note that even though Agents acting under existing powers of attorney do not have to sign the special acknowledgment, they are required to abide by the new rules governing their conduct. If you want, you can write your power of attorney so that your Agent can act under more relaxed rules. This may be appropriate when you have the utmost trust and confidence in your Agent and you don't want their actions to be challenged by others once you have died.

The final major change under this new law has to do with the power to make gifts. In another article, I look at some of the issues concerning gifts by an Agent under a power of attorney. However, it's generally a good idea to grant this power if you want your Agent to be able to take action to reduce estate or inheritance tax, or to preserve assets in the event you enter a nursing home. Under the old Pennsylvania law, general language in a power of attorney was often sufficient to permit such gifts. Now, however, your Pennsylvania power of attorney must be very specific if you want your Agent to be able to make gifts of your assets. The new rules on gifts apply to Pennsylvania powers of attorney signed after December 11, 1999. Even though Pennsylvania powers of attorney signed before this date are not governed by the new rule on gifts, if your old power of attorney doesn't mention the authority to make gifts, you should consider adding such a power. If your power of attorney does not contain proper authority, your Agent won't be able to take steps to minimize taxes or preserve assets for your spouse or family.

Quite often, my clients tend to think of the power of attorney as a simple form. This was never the case. Everyone's circumstances and family are different, and you should consider these differences when designing your power of attorney. In light of this new law, your attorney should be taking even more time to discuss the options so that your power of attorney is crafted to meet your specific needs.

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