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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All contents Copyright © Robert Clofine 1999