Pennsylvania is enacting broad changes to the law governing powers of attorney. House Bill 1429 (HB 1429) was unanimously passed by the state House and Senate in June 2014 and was recently signed into law by Governor Corbett.
The new law will require careful study by attorneys and other who draft POAs in Pennsylvania. Among the changes include:
- The Notice that the principal is required to sign is modified. Language is added to warn that the document may grant the agent the power to give away the principal’s property or change how the property is distributed at death. The principal is advised to seek the advice of an attorney at law before signing the POA.
- The acknowledgment form that the agent signs is revised to specify that the agent must act in accordance with the principal’s reasonable expectations to the extent that the agent actually knows them and, otherwise, in the principal’s best interest. The form notes that the agent must act in good faith and only within the scope of authority granted to the agent by the principal in the power of attorney.
Note that the above requirements of a notary, notice, agent’s acknowledgment do not apply to a POA which exclusively provides for making health care decisions or mental health care decisions.
Authority that requires specific and general grant of authority
The new law limits the power of an agent to take certain actions unless authority is expressly granted in the POA and is not prohibited by another instrument. These “hot power” or “express grant” actions that must be specifically authorized are:
(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 granted under the power of attorney.
(6) Waive the principal’s right to be a beneficiary of a joint and survivor annuity, including a survivor benefit under a retirement plan.
(7) Exercise fiduciary powers that the principal has authority to delegate.
(8) Disclaim property, including a power of appointment.
The new law further limits the exercise of hot power authority by agents who are not in certain family relationship with the principal. However, a POA can be written to specifically opt out of these limitations.
This new section will require careful drafting by the lawyer whose client wants to authorize their agent to have one or more hot powers.
Please note there are several additional new sections of the new POA law that require additional review. Parts of the new POA law go into effect immediately upon the Governor’s signature. The remainder of the new sections take effect on January 1, 2015.