A comprehensive estate plan should include a Power of Attorney. A Power of Attorney or “POA” is a legal document in which a person appoints another to make decisions and carry out specific duties on behalf of the person. Pennsylvania authorizes a “Durable” POA which means that the powers given to another are exercisable notwithstanding the person’s subsequent disability or incapacity.
Definitions
- Principal. The person who creates the Power of Attorney
- Agent. The person named in the POA who has the authority to act on behalf of the principal. The agent is usually a spouse, child or children, or other close family member.
Spring Power of Attorney
Since Pennsylvania allows for the “Durable” Power of Attorney, the Principal can create the POA so that the Agent has the authority to act immediately or the Principal can elect to have the powers effective at a specified future time or upon the occurrence of a contingency (springing power). For example, the POA may specify that the powers are only effective if the Principal becomes incapacitated or disabled.
Pennsylvania Power of Attorney Requirements
To be valid, the POA must be written, dated, and signed by the Principal or by another individual on behalf of and at the direction of the Principal if the Principal cannot sign and by specifically directing the individual to sign the POA. The POA must be signed by two witnesses in the presence of a notary. Witnesses must be at least 18 years of age and cannot be the person who is signing on behalf of the principal, an agent designated in the document or the notary.
Pennsylvania law requires the POA to include a Notice provision and before the Agent can act, the Agent must execute and affix to the POA an Acknowledgement. The Notice and the Acknowledgement must comply with Pennsylvania law.
Powers Granted To An Agent
The Principal should consider giving some or all of the following powers to an Agent:
- Make limited gifts
- Creating a Trust for the benefit of the Principal
- To make additions to an existing Trust for the benefit of the Principal
- To claim an elective share of the estate of a deceased spouse
- To renounce fiduciary positions
- To withdraw and receive the income or corpus of a Trust
- To engage in real property transactions
- To engage in tangible personal property transactions
- To engage in stock, bond and other securities transaction
- To engage in commodity and option transactions
- To engage in banking and financial transactions
- To borrow money
- To enter safe deposit boxes
- To engage in insurance and annuity transactions
- To engage in retirement plan transactions
- To handle interests in estates and trusts
- To pursue claims and litigation
- To receive government benefits
- To pursue tax matters
- To operate a business or entity
Agent’s Frequently Asked Questions
What does it mean to be a “fiduciary”?
This means that you will be held to the highest standards of good faith, fair dealing and undivided loyalty with respect to the Principal. You must always act in the Principal’s best interest and keep his or her goals in mind in making any discretionary decisions. Your duty only covers the level of care you take in your own actions as Agent.
What are my duties as Agent?
An agent must act in accordance with the Principal’s reasonable expectations to the extent actually known by the Agent, must act in the Principal’s best interests, must act in good faith, and must act only within the scope of authority granted in the POA. Other duties include the following:
- Act loyally for the principal’s benefit.
- Keep the Agent’s funds separate from the Principal’s funds.
- Avoid a conflict of interest that impairs the agent’s ability to act.
- Act with appropriate care, competence and diligence.
- Keep a record of all receipts, disbursements and transactions made on behalf of the Principal.
- Cooperate with a person who has authority to make healthcare decisions for the Principal.
- Preserve the principal’s estate plan considering all relevant factors.
Can I be held liable for my actions as an Agent?
The short answer is yes. An Agent can usually avoid liability so long as the agent acts in good faith and acts in the best interests of the Principal.
When does the power of attorney take effect?
Unless the POA is springing, it takes effect as soon as it is signed by the Principal. In most cases, even when the POA is immediately effective, the Principal does not intend it to be used until he or she becomes incapacitated or disabled. You should discuss this with the Principal so that you know when to carry out his or her wishes.
What if there is more than one attorney-in-fact?
Depending on the wording of the POA, you may or may not have to act together on all transactions. In most cases, when there are Co-Agents, they are appointed severally, meaning that they can act independently of one another. Nevertheless, it is important for them to communicate with one another to make certain that their actions are consistent. If the Co-Agents are required to act jointly, and in agreement, the Agents must closely work together on all transactions.
Can I be fired as an Agent?
Certainly. The Principal may revoke the Power of Attorney at any time. All he or she needs to do is send you a letter to this effect. The appointment of a conservator or guardian does not immediately revoke the power of attorney. However, the conservator or guardian, like the principal, has the power to revoke the power of attorney.
What kind of records should I keep?
It is very important that you keep complete financial records and documentation to back up the records. The easiest way to keep records is to run all funds through a checking account. The checks will act as receipts and the checkbook register as a running account.
Can I be compensated for my work as attorney-in-fact?
Yes. Generally, you are entitled to reasonable compensation for your services. In many cases, the Agent is a family member and does not expect to be paid. If you would like to be paid, it is best that you discuss this with the Principal, agree on a reasonable rate of payment and put that agreement in writing. That is the only way to avoid misunderstandings in the future.
Can I continue to act after the Principal is deceased?
No. The POA is invalid upon the death of the Principal. A person must be appointed as the Personal Representative of the decedent’s estate.
DURABLE POWER OF ATTORNEY – THE MARTIN LAW FIRM
The estate attorneys at the Martin Law Firm, P.C. can assist you with the creation of a Durable Power of Attorney or, if you are an Agent, we can help you comply with Pennsylvania law as you fulfill your duties and responsibilities. Call us today for a free case evaluation at 215-646-3980.
