New Power of Attorney Law in Pennsylvania

By executing a power of attorney, a person (the "principal") can appoint another individual or institution to act as his or her agent for the purposes stated in the power of attorney (POA). Thus, the POA gives the agent the authority to act on behalf of the principal. A POA can appoint more than one agent, in which case it should be specified whether both agents must act together, or whether they can each act individually.

Types of Powers of Attorney

Some powers of attorney last for only a specific period of time or are effective with respect to specific transactions. Other powers of attorney go into effect immediately and continue until revoked by the principal or the death of the principal. Still others only go into effect when the principal becomes incapacitated, as decided by one or more doctors or as otherwise specified by the POA. This latter type of POA is generally referred to as a "springing" power of attorney.

While a power of attorney is recommended for all individuals to guard against incapacity caused by disabling accidents or other unforeseen situations or illness, it is particularly useful for aging relatives who are concerned about Alzheimer's disease or other age-related problems. A properly drafted and executed POA can avoid the necessity for guardianship proceedings and allows a smooth transition in the management of the principal's financial affairs.

Under Pennsylvania law, POAs are presumed to be "durable," and will not terminate at the disability of the principal. Thus, a power of attorney will continue through the remaining lifetime of the principal unless it is revoked. If a POA is revoked, all originals and copies should be retrieved and destroyed. A financial institution is authorized to rely on a POA until it receives notice of revocation.

A Powerful Document

The agent under a POA typically has wide ranging powers to act with respect to the principal's assets, although these powers can be limited by the power of attorney. The POA should only be given to somebody who is completely trusted and capable of acting intelligently with respect to the powers granted.

It is advisable for the principal to "pre-clear" a power of attorney with his or her bank or financial institution. This avoids any problems that might come up when the POA needs to be used.

The principal can divide responsibilities for his or her affairs among several people. For example, the principal may wish to delegate responsibility for his or her financial affairs to one person and decision-making responsibility concerning health care issues to someone else. This person would then execute several powers of attorney, with one restricted to financial matters and the other for use in making health care decisions. A person granting to another person the authority to make health care decisions should also consider a living will to direct whether to continue life support in situations where there is no hope of recovery.

The POA terminates at the principal's death and cannot be used as a substitute for estate administration. A power of attorney cannot grant to an agent the right to execute a will on behalf of the principal and cannot itself substitute for a will. Therefore, the power of attorney should be executed in conjunction with an overall estate plan containing living wills, wills and trusts, if necessary.

New Law in Pennsylvania

Recently enacted legislation has changed somewhat the law regulating powers of attorney and has added additional safeguards. Under the new law, the person to whom the power is granted is now referred to as an "agent," instead of the previous, somewhat confusing, "attorney-in-fact".

More importantly, for powers of attorney executed after April 12, 2000, there is a statutorily-prescribed cover page which must be signed by the principal, which contains warnings concerning the use of the POA. In addition, in order for the power of attorney to be effective, the agent must sign an acknowledgment in which the agent states that all powers will be exercised for the benefit of the principal, the principal and agent's assets will be kept separate, the agent will exercise reasonable caution and prudence, and the agent must keep full and accurate records of all expenses made on behalf of the principal.

Powers of attorney executed in the old format before April 12, 2000, will continue to be respected under the new law. However, as financial institutions become accustomed to seeing the new form for the POA, it is to be expected that over time, powers of attorney in the old form may become more difficult to use. Therefore, as the opportunity presents itself, powers of attorney currently in place should be updated to reflect the new format.