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December 13, 2016
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In the Fall 2014 issue of McNees Insights – Estate Planning, my colleague Andrew Rusniak and I discussed Pennsylvania’s changes to the law governing Powers of Attorney (Act 95 of 2014, amending Chapter 56 of the Probate Estates and Fiduciaries Code, 20 Pa.C.S.A §5601, et. seq.), which became effective January 1, 2015.  Almost two years have passed since that date and we thought that we would make some observations about how the changes are playing out in reality.

Durable General Powers of Attorney (“DGPOAs”) are fundamental estate plan documents used to allow a person (the “Principal”) to appoint another person (the “Agent”) to exercise certain powers on behalf of the Principal relating to financial matters, for the benefit of the Principal.  In brief, the changes made by Act 95 were as follows:

• DGPOAs executed after January 1, 2015 must have revised Notices and Acknowledgements.
• DGPOAs executed on or after January 1, 2015 must be witnessed by two people and notarized.
• Certain specific powers that may be granted by the DGPOA are considered ‘hot’ powers and must be expressly included in the POA to be authorized. These include not only the power to make gifts, but also the right to (a) change beneficiary designations on retirement plans, annuities, and life insurance policies; (b) disclaim property; (c) amend or revoke a revocable trust; and (d) create or eliminate a survivorship interest in property.
• Clarification of the extent to which DGPOAs may be relied upon by third parties (banks, brokerage firms and the like) and the burden on each of the parties (Principal, Agent and third parties) as to provision of a legal opinion as to validity, an English translation of DGPOAs executed in foreign languages, and certification by the Agent as to certain matters.

One clear and anticipated result of these changes is far more scrutiny of DGPOA documents by banking and investment institutions.  While Act 95 did not void Powers of Attorney executed before 2015, it has effectively made the use of those powers difficult and even suspect.  Technically speaking, a DGPOA executed before 2015 will be effective if it comported with the law in effect at the time it was originally signed, the current provisions of the law serve as a ‘flag’ for older powers and may put the burden on the Agent and estate planning counsel for the Principal (at the Principal’s expense) to provide supplemental information to substantiate the effectiveness of the old document.   Where a Principal has become incapacitated since the execution of the old document, this burden has the potential to be substantial.

For this reason, and as Andrew and I recommended in our earlier article, we encourage clients to review their existing documents and determine if they should execute an up-to-date version.  For clients with Powers of Attorney executed before April 2000, we believe that it is critical that new documents be signed if possible.  For clients with DGPOAs executed after April 2000, while many of these documents remain effective, we recommend a review of the document to ensure that it substantially meets the current requirements.

When properly drafted and executed, Durable General Powers of Attorney can be vital estate planning documents that may help avoid the necessity of seeking a guardianship for an incapacitated person and allow a trusted family member or professional fiduciary to carry out the Principal’s wishes throughout the aging process.  Act 95 is a good reminder that the best estate plans should be periodically reviewed to ensure continued effectiveness and avoid unpleasant surprises in the future.

© 2016 McNees Wallace & Nurick LLC
McNees Insights is presented with the understanding that the publisher does not render specific legal, accounting or other professional service to the reader. Due to the rapidly changing nature of the law, information contained in this publication may become outdated. Anyone using this material must always research original sources of authority and update this information to ensure accuracy and applicability to specific legal matters. In no event will the authors, the reviewers or the publisher be liable for any damage, whether direct, indirect or consequential, claimed to result from the use of this material.