A Durable Power of Attorney or “POA” under Pennsylvania Law is a written document in which the principal designates or appoints another as his or her agent. The “durable” nature of the authority conferred upon the agent is exercisable notwithstanding the principal’s subsequent incapacity or disability.
Powers Granted to an Agent
The principal should consider giving broad powers to the agent for the following transactions:
- Tangible personal property
- Stock, bond and other securities
- Commodities and options
- Banking and financial
- Insurance and annuities
- Litigation and resolution of claims
- Retirement plans
- Government benefits
- Tax matters
- Operating a business
- Borrowing money
- Entering a safe deposit box
Other powers a principal should consider giving the agent include:
- Making limited gifts
- Creating, amending, or revoking an inter-vivos trust
- Creating or changing rights of survivorship
- Creating or changing a beneficiary designation
- Delegating authority granted under the power of attorney
- Waiving the principal’s right to be a beneficiary of an annuity
- Exercising fiduciary powers that the principal has authority to delegate
- Disclaiming property
- Accessing electronic communications and digital assets of the principal.
A principal can appoint more than one agent. If the principal appoints more than one agent, the principal should specify whether the co-agents must act together or whether 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.
The principal should also designate a successor agent to step in and act if the original agent can no longer serve.
“Springing” Power of Attorney
A principal has two options for establishing when the agent has the legal authority to act. The principal may provide that the power shall become effective immediately upon proper execution of the power of attorney document. The other option is for the principal to allow for the agent to act only at a specified future time or upon the occurrence of a contingency. When the power of attorney becomes effective at a later time, this is often referred to as a “springing” power. One common example of a springing power is a contingency that the agent can only act when the principal is determined to be incapacitated or disabled.
Power of Attorney Legal Requirements
To be valid, the power of attorney must be written, dated, and signed by the principal. The power of attorney can be signed by another individual on behalf of the principal if the principal cannot sign and if the principal specifically directs the individual to sign the power of attorney on his or her behalf. The power of attorney must also 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. The POA must include a notice section at the beginning of the document. The contents of the notice section must be in capital letters and signed by the principal. The contents of the notice are set forth in the Pennsylvania Code. The agent must also sign an acknowledgment in the form set forth in the Pennsylvania Code.
Agent Duties and Responsibilities
The Agent is considered a “fiduciary” which means that the agent is held to the highest standard of good faith, fair dealing and undivided loyalty with respect to the principal. Generally, the agent must always act in good faith and in the principal’s best interest. An agent must also act in accordance with the principal’s reasonable expectations to the extent actually known by the Agent and within the scope of authority granted in the power of attorney.
The Agent must do all the following:
- Keep the Agent’s funds separate from the principal’s funds unless the funds were not kept separate as of the date of the execution of the power of attorney or the principal commingles the funds after the date of the execution of the power of attorney and the agent is the principal’s spouse.
- Avoid any conflict of interest that impairs the agent’s ability to act impartially in the principal’s best interests.
- Act with appropriate care, competence and diligence ordinarily exercised by agents in similar circumstances.
- 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.
- Attempt to preserve the principal’s estate plan considering all relevant factors such as the value and nature of the principal’s property, minimization of taxes, and eligibility for benefits and assistance under a statute or regulation.
Disclosure of Receipts, Disbursements, or Transactions
Unless otherwise provided in the power of attorney, the agent does not have to disclose receipts, disbursements, or transactions conducted on behalf of the principal. It is highly recommended that the agent keeps receipts and records of disbursements or transactions because the agent may be ordered to disclose them by a court. Others can also compel the agent to disclose receipts, disbursements, or transactions. Pennsylvania law requires the disclosure when requested by the principal, guardian, conservator, another fiduciary acting for the principal, government agency, or the personal representative or successor in interest to the principal’s estate.
Pennsylvania law also requires the agent to file an account when ordered to so by the court. An account is a formal document that identifies all transactions of the agent. Since the agent may be required to disclose receipts, disbursements or transactions or the agent may be ordered to file an account, the agent should keep very detailed records.
Revoking the Power of Attorney
The principal may revoke the power of attorney at any time. All he or she needs to do is send the agent a letter notifying the agent of the revocation. The appointment of a conservator or guardian does not immediately revoke the power of attorney; however, a conservator or guardian has the power to revoke the power of attorney.
Agent Compensation and Expense Reimbursement
Agents are entitled to reasonable compensation for their services. In many cases, the agent is a family member and does not expect to be paid. If the agent wants to be compensated, the agent and principal can reach an agreement on the amount of compensation. This could include, for example, an hourly fee or a fixed monthly fee. If no agreement exists, then the agent should determine what is reasonable. It is important to remember that the court has oversight on what is considered reasonable. Therefore, the agent should document the services provided and the time spent. The agent can assign a reasonable hourly rate or some other form of compensation that is reasonable and commensurate with the services being provided. The agent is also entitled to reimbursement for actual expenses advanced on behalf of the principal and to reasonable expenses incurred in connection with the performance of the agent’s duties.
Filing and Recording the Power of Attorney
It is not necessary to file and record a power of attorney. An originally executed power of attorney may be filed with the clerk of the orphans’ court division of the court of common pleas in the county in which the principal resides; in the office for the recording of deeds of the county of the principal’s residence; and in each county in which real property to be affected by an exercise of the power is located. The clerk of the orphans’ court division or any office for the recording of deeds with whom the power has been filed may, upon request, issue certified copies of the power of attorney. Each such certified copy shall have the same validity and the same force and effect as if it were the original, and it may be filed of record in any other office of this Commonwealth (including, without limitation, the clerk of the orphans’ court division or the office for the recording of deeds) as if it were the original.
A photocopy or electronically transmitted copy of an originally executed power of attorney has the same effect as the original.
Death of the Principal
Upon the death of the principal, the power of attorney is automatically invalid. The agent no longer has any authority to act on behalf of the principal.
Durable Power of Attorney – The Martin Law Firm, P.C.
A durable power of attorney should be incorporated into an estate plan along with a last will and testament, medical power of attorney, and a living will. The Martin Law Firm, P.C. routinely assists individuals and married couples with the creation of an estate plan to achieve specific objectives and help secure the financial future. Call us today for a free case evaluation at 215-646-3980.