On Monday, June 16, 2014, the Pennsylvania Senate adopted (50-0), after three required considerations, a revised version of House Bill 1429, into a new Printers No. 3708. The Senate's version differs from the version that the House had adopted (198-0) nearly a year ago, on June 19, 2013, in the form of HB 1429, PN 2006.
Significant changes were suggested to Powers of Attorney, under Chapter 56, of Title 20, of the PA Probate, Estates & Fiduciaries Code, since at least March, 2010, due to a Report and Recommendations on Powers of Attorney, by the Joint State Government Commission's Advisory Committee on Decedents' Estate Laws.
That Report was updated in a further June, 2011 Report and Recommendations on Powers of Attorney and Health Care Decision-Making, to address the concerns raised by the decision of the Pennsylvania Supreme Court in Vine v. Commonwealth, 9 A.3d 1150 (Pa. 2010).
That case involved the statutory immunity afforded to third parties that act in good faith on the instructions of an agent pursuant to a facially valid power of attorney without actual knowledge that the power of attorney is void or voidable, has expired, or that the agent is exceeding the scope of his authority. See: PA EE&F Law Blog posting, Proposed Amendments of PA POA, Guardianship & Health Care Directive Laws (06/14/11).
On March 12, 2013, the Senate Judiciary Committee reported from committee, its legislation in the form of Senate Bill 620. The Senate passed Senate Bill 620 on March 18, 2013, by a 48-0 vote.
On June 19, 2013, the House passed its version of reform legislation, House Bill 1429, by a 198-0 vote.
The discussions resulting from that case, those Reports, and those two bills were long and detailed among representatives of the Pennsylvania Bar Association, the Pennsylvania Chapter of the National Association of Elder Law Attorneys, and the Joint State Government Commission staff.
Nearly a year later, on June 10, 2014, upon Senate Judiciary Committee consideration of HB 1429, PN 2006, and a package of amendments proposed to it, that bill's provisions were modified, reported to the Senate, and then adopted quickly by the Senate unanimously. The Senate's own adopted bill, SB 620, remained pending before the House Judiciary Committee, even as HB 1429, as amended, was adopted by the Senate and returned to the House for concurrence.
Without knowing (but while holding hope), I assume that the recent Senate amendments are a form of compromise offered to achieve some legislation acceptable to both the House and Senate, and thereby end the long delay for reform of Pennsylvania's power of attorney law.
So, what might change? I refer to an excellent summary of HB 1429, in its prior Printer's No. 2006, by Senate Counsel Gregg Warner, Esq. (a highly competent lawyer and a great guy), in his Memorandum of June 5, 2014, to the Senate Judiciary Committee, chaired by the prime sponsor of SB 620, Senator Stewart J. Greenleaf.
For the Senate's recent amendments, you must review the latest HB 1421, Printers No. 3708, which reveals additions and deletions. [See: Update below, which identifies most changes.]
The concepts discussed below highlight the many important changes proposed to PA's Power of Attorney statute, subject, still, to legislative agreement and to a Governor's concurrence.
in prior Printers No. 2006
A power of attorney shall be dated and signed by the principal. For a power of attorney executed on or after the effective date of this legislation, the signature or mark of the principal must be acknowledged before a notary public and witnessed by two individuals.
The notice provision that accompanies a power of attorney is expanded to inform the principal that the agent must act in accordance with the principal’s reasonable expectations to the extent those expectations are actually known by the agent and, otherwise, the agent must act in the principal’s best interest, in good faith and only within the scope of authority granted in the power of attorney.
If the principal grants broad authority to an agent, the notice warns the principal that the broad grant of authority may allow the agent to give away the principal’s property while the principal is alive or substantially change how the principal’s property is distributed at death. The notice advises the principal to seek the advice of an attorney.
The acknowledgement executed by the agent specifies that the agent must act with the principal’s reasonable expectations to the extent that the agent actually knows them and, otherwise, in the principal’s best interest. 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.
The requirements for witnesses, notice and the agent’s acknowledgment do not apply to a power contained in an instrument used in a commercial transaction which authorizes an agency relationship. The subsection has been restructured.
Also, the requirements of a notary, notice and the agent’s acknowledgment and the provisions relating to an agent’s duties do not apply to a power of attorney which exclusively provides for making health care decisions or mental health care decisions.
A section is added providing for the agent’s duties. Generally, an agent must act in accordance with the principal’s reasonable expectations to the extent the agent actually knows them and, otherwise, in the principal’s best interest. The agent must act in good faith and only within the scope of authority granted in the power of attorney.
In addition to the general duties, the amendment lists other duties of the agent that come into play unless otherwise provided in the power of attorney. They include acting loyally for the principal’s benefit; keeping the agent’s funds separate from the principal’s funds; acting as so not to create a conflict of interest; acting with care, competence and diligence; keeping records; cooperating with a person who has authority to make health care decisions for the principal; and attempting to preserve the principal’s estate plan.
Nonliability of an agent
The bill also lists when an agent is not liable. For example, an agent that acts in good faith shall not be liable to a beneficiary of the principal’s estate plan for failure to preserve the plan. Absence a breach of duty to the principal, an agent shall not be liable if the value of the principal’s property declines.
Disclosure of receipts, disbursements or transactions
Except as otherwise provided in the power of attorney, an agent shall not be required to disclose receipts, disbursements or transactions conducted on behalf of the principal unless ordered by a court or requested by the principal, a guardian, conservator, another fiduciary acting for the principal, governmental agency or, upon the principal’s death, the personal representative of the principal’s estate. The agent has 30 days to comply with the request or to indicate that additional time, up to an additional 30 days, is needed.
Specific and general grant of authority
A section is added limiting what an agent may do with the principal’s property. In these situations the power of attorney must expressly grant the agent the authority and the exercise of the authority may not have been prohibited by another instrument. The situations include powers such as creating, amending, revoking or terminating an inter vivos trust; making a gift; creating or changing rights of survivorship; and creating or changing a beneficiary designation.
Section 5603 is amended to provide for the power to make limited gifts. Unless the power of attorney otherwise provides, language in a power of attorney granting general authority with respect to gifts authorizes the agent to make gifts in limited situations.
Third party liability
Sections 5601(f), 5608, 5608.1, 5608.2 and 5611 all apply to third party liability. A person who in good faith accepts a power of attorney without actual knowledge that it is invalid may, without liability, rely upon the power of attorney as if the power of attorney and agent’s authority were genuine, valid and still in effect and the agent had not exceeded and had properly exercised the authority.
A person who is asked to accept a power of attorney may, without liability, request further information including an agent’s certification, an English translation, or an opinion of counsel relating to whether the agent is acting within the scope of authority granted by the power of attorney.
Section 5608.1 provides for when a person may refuse to accept an acknowledged power of attorney. A person shall either accept a power of attorney or request an affidavit, certification, translation or an opinion of counsel not later than seven business days after presentation of the power of attorney for acceptance.
A power of attorney need not be accepted for certain reasons such as if the person is not otherwise required to engage in a transaction with the principal in the same circumstances; a request for a certification, a translation, an affidavit, or an opinion of counsel is refused; the person in good faith believes that the power of attorney is not valid or the agent does not have the authority to perform the act requested; or the person makes a report or has actual knowledge that another person has made a report under the Older Adults Protective Services Act stating a good faith belief that the principal is being exploited.
A person who refuses, in violation of this section, to accept a power of attorney shall be subject to civil liability for pecuniary harm to the economic interests of the principal proximately caused by the person’s refusal to comply.
Section 5608.2 provides for actions taken by employees. A person who conducts activities through employees shall be considered to be without actual knowledge of a fact relating to a power of attorney, a principal or an agent, if the employee conducting the transaction involving the power of attorney is without knowledge of the fact.
The House concurred with the Senate and voted affirmatively on Wednesday, June 18th (193-0) to adopt the amended form of HB 1429, Printers No. 3708, as adopted on Monday, June 16th by the Senate.
The legislation was sent to the Governor for his signature, which I anticipate will be forthcoming, following the compromise attained in the Legislature. For an update, see: PA EE&F Law Blog posting PA POA Reform legislation on Governor's Desk (06/19/14).
Gregg Warner, Esq., as Senate Judiciary Counsel, also drafted on June 5, 2014, a summary of the amendments (per Amendment No. A07520) considered by the Senate Judiciary Committee that resulted in the most current printers number for HB 1429.
Following is that summary of the Senate's amendments, which resulted in the most recent version, which was adopted by the Senate on June 16th and returned to the House for concurrence.
to House Bill 1429, into new Printers No. 3708
- This amendment makes additional revisions in the execution of powers of attorney when the principal is unable to sign but specifically directs another person to sign the power of attorney. The notary public or other individual authorized by law to take acknowledgments for a power of attorney may not be the agent designated in the power of attorney. Witnesses must be 18 years of age or older.
- The provision in the bill requiring an agent to keep the agent’s funds separate from the principal’s funds is revised. There is already an exception if the funds were not kept separate as of the date of the execution of the power of attorney. The amendment adds an exception in the case of a principal who commingles the funds after the date of the execution of the power of attorney and the agent is the principal’s spouse.
- A principal may specify certain powers by referring to the language in the statute. A provision is added making clear that the principal may modify the authority of an agent that is incorporated by reference.
- Currently the statute states that an executed copy of the power of attorney may be filed with the clerk of the orphans’ court. The amendment changes the provision to an originally executed power of attorney and allows a power of attorney executed in electronic form to be recorded. Except for the purpose of filing or recording with the clerk, a photocopy or electronically transmitted copy of an originally executed power of attorney has the same effect as the original.
- The power to engage in securities transactions is clarified to include consolidations, dissolutions and liquidations.
- A person who is asked to accept a power of attorney may request an English translation of or an opinion of counsel regarding a power of attorney. Generally the translation or opinion is at the principal’s expense unless the request is made more than seven business days after the power of attorney is presented. The provision is expanded to include a power of attorney which was previously accepted but is presented to exercise a power not previously exercised by the agent in a transaction with that person.
- The effective date is changed to January 1, 2015.