PA 2010 POA Reform Report Issued by JSGC
On March 23, 2010, after an 18-month study, the Pennsylvania Joint State Government Commission issued its report, dated March, 2010:
POWERS OF ATTORNEY:
PROPOSED AMENDMENTS to the
PROBATE, ESTATES and FIDUCIARIES CODE
REPORT of the ADVISORY COMMITTEE on DECEDENTS’ ESTATES LAWS
That Resolution tasked the Joint State Government Commission, acting through its Advisory Committee on Decedents' Estates Laws, as follows:
RESOLVED, That the House of Representatives direct the Joint State Government Commission to have its Advisory Committee on Decedents' Estates Laws study the Uniform Power of Attorney Act and Pennsylvania's current power of attorney statute to determine whether any amendments should be made to Pennsylvania's current statute; and be it furtherThe 2010 POA Report, with attachments, is 214 pages long, and includes proposed legislation to amend Chapter 56 of the Pennsylvania Probate, Estates & Fiduciaries Code [unofficial version posted online], which statutorily authorizes and regulates powers of attorney in the Commonwealth.
RESOLVED, That the Joint State Government Commission report its recommendations to the House of Representatives within 18 months of the adoption of this resolution.
The Report proffers legislation that, if adopted into law, would significantly change those actions authorized to be conducted by an agent under a power of attorney in Pennsylvania and also expand the ability of the Orphans' Court Divisions to apply remedies for unauthorized conduct by an agent acting under a power of attorney.
The introduction of H.R. 484 was discussed in detail on this Blog upon its introduction by Representative Jesse White. See: PA EE&F Law Blog posting House Reps Propose Further POA Study (11/05/07), which focused on an article by Dennis B. Roddy, entitled "Lawmaker: Tighten rules on power of attorney" published on November 2, 2007, in the Pittsburgh Post-Gazette.
Prior Post-Gazette articles highlighted a need for consideration, in Pennsylvania, of the latest model of a Uniform Power of Attorney Act (2006) (UPAA), approved by the National Conference of Commissioners on Uniform State Laws, on July 13, 2006. See: PA EE&F Law Blog postings: "Powers of Attorney" Investigated in Series (09/04/07); and Final "Courting Trouble" Article on POA Abuse (09/05/07).
The additional issues requested by HR 484 to be addressed were those mentioned in my prior posting entitled "Super Powers" Under Examination (06/05/07). In that posting, I had reflected on an article which appeared on June 4, 2007, in Forbes Magazine entitled "Taming the Superpower", by Ashlea Ebeling.
The "General Observations" section of the 2010 POA Report stated the overall findings of the JSGC-ACDEL in contrasting PEF Code Chapter 56 to the UPAA:
- The Advisory Committee recognized that although the UPAA is better organized and more thorough and specific than Pennsylvania's current power of attorney statute, many of its best principles are already incorporated into 20 Pa.C.S. Chapter 56. The Advisory Committee acknowledged a general sense of satisfaction among practitioners regarding Pennsylvania's current power of attorney statute. Accordingly, it did not favor the wholesale adoption of the uniform act, instead opting to recommend discrete amendments to 20 Pa.C.S. Chapter 56 to address specific concerns or problems encountered by practitioners and others.
- The primary concern evidenced by the court system and commentators regarding durable powers of attorney is the potential for abuse by agents seeking to enrich themselves or benefit those close to them, such as through the altering of the principal's estate plan. Nevertheless, durable powers of attorney are very helpful tools for handling the principal's financial matters as well as for planning purposes; their inexpensive and private nature contrasts with the guardianship alternative. Therefore, the Advisory Committee reasoned that any statutory amendment to 20 Pa.C.S. Chapter 56 should preserve what is best about powers of attorney in Pennsylvania: their privacy, expediency and efficiency.
- The Advisory Committee also reviewed several provisions of 20 Pa.C.S. Chapter 54 regarding health care powers of attorney since 20 Pa.C.S. § 5602(a)(8), (9) and (23) and § 5603(h) and (u.1) currently permit a principal to incorporate by reference in a power of attorney the power to (1) authorize the principal's admission to a facility and enter into agreements for the principal's care, (2) authorize medical and surgical procedures and (3) make an anatomical gift of all or part of the principal's body. The Advisory Committee observed that several amendments to 20 Pa.C.S. Chapters 54 and 56 were appropriate regarding health care decision-making. [Emphasis added]
§ 5601. Subsection (b) is amended to provide that two witnesses are required when any power of attorney is executed, thereby changing current law, which provides that two witnesses are only required when the power of attorney is executed by mark or by another individual. The amendment makes the execution of a power of attorney under Chapter 56 consistent with the execution of a health care power of attorney under Chapter 54. However, an agent appointed under a Chapter 56 power of attorney may not be a witness. Notarization, where the specific circumstances permit, is good practice but is not required. Subsection (b) is also amended to specify that a power of attorney “shall be dated and signed by the principal,” thereby replacing “signed and dated by the principal.
Subsections (d) and (e) are amended to provide statutory language regarding the preservation of the estate plan of the principal, including the effect of intestacy if the principal does not have a will.
Subsection (e.3) is new and provides that an agent and a recipient of a gift or other financial benefit, during the principal's life or at the principal's death, arising from the action of the agent is liable as equity and justice may require to the extent that the court determines that the action of the agent was inconsistent with (1) prudent estate planning or financial management for the principal or (2) the known or probable intent of the principal with respect to the disposition of the principal's property. An agent who in good faith exercises reasonable caution and prudence shall not be personally liable.
§ 5601.2. The title of § 5601.2 and subsection (a) are amended to specify that, similar to the gift provisions, a principal may empower an agent to make changes to the principal's estate plan only in specific circumstances. A power to make a gift or make changes to the principal's estate plan may not be inferred from a grant of another power or from a general grant of authority to do anything that the principal could do, except to the extent that a principal expressly grants the agent the power to provide for personal and family maintenance.
Subsection (b) is amended to clarify that limited gifts authorized in compliance with this subsection do not require court approval.
Subsection (c) is amended to change the title from “unlimited gifts” to “other gifts specifically authorized and not requiring court approval” and to clarify that other gifts specifically authorized in compliance with this subsection do not require court approval. The amendments permit a principal to authorize an agent to make a gift, which is not a limited gift under subsection (b), only by specifically identifying the donee and the gifted property or cash amounts. In addition, subsection (c)(1) specifies that the phrase “any donee” or other language showing a similar intent is not permitted.
Subsection (c.1) is new and provides that an agent may act without court approval if the agent's action is otherwise authorized by the power of attorney (e.g., to make a beneficiary designation or create a joint account) and maintains and is consistent with the preservation of the principal's estate plan, including the effect of intestacy if the principal has no will. An action may not be taken if the interest of any beneficiary under the principal's existing estate plan, including an intestacy if the principal has no will, is prejudiced thereby.
Subsection (c.2) is new and provides that an agent may make gifts or change the principal's estate plan (such as by creating or changing rights of survivorship or a beneficiary designation; by creating an inter vivos trust or amending, revoking or terminating an existing trust; or by waiving the principal's right to be a beneficiary of a joint and survivor annuity) only if the power of attorney expressly grants the agent the authority and the court approves the agent's action, in the manner set forth in new subsection (g), after finding that the action is consistent with (1) prudent estate planning or financial management and (2) the known or probable intent of the principal with respect to the disposition of the principal's property. If an agent complies with the grant of authority for gifts, the agent does not need to follow the procedures under Chapter 55 (incapacitated persons) so as to implement estate planning changes. Conversely, if the agent does not so comply, a guardianship proceeding would need to occur.
Subsection (d)(1), in defining the nature of a limited gift, is amended to add that the agent may make a gift to each donee to a tuition savings account or prepaid tuition plan.
Subsection (e), concerning equity and justice with respect to gifts, is repealed and replaced by § 5601(e.3) to make the concept of equity and justice applicable to all actions of an agent under Chapter 56.
Subsection (g) is new and provides for procedures concerning court proceedings for subsection (c.2).
§ 5602. Subsection (a) is amended to repeal paragraph (8) (“To authorize my admission to a medical, nursing, residential or similar facility and to enter into agreements for my care”), paragraph (9) (“To authorize medical and surgical procedures”) and paragraph (23) (“To make an anatomical gift of all or part of my body”). The substance of these paragraphs is being moved to Chapter 54.
Subsection (a) is amended to broaden paragraph (17) to include annuity transactions.
Subsection (a) is amended to add new paragraphs (24) (“To operate a business or entity”) and (25) (“To provide for personal and family maintenance”).
Subsection (c) is amended to change the reference from “executed copy of the power of attorney” to “originally executed power of attorney.”
Subsection (d) is new and specifies that, except for the purpose of filing at the courthouse, a photocopy or electronically transmitted copy of an originally executed power of attorney has the same effect as the original.
§ 5603. Subsection (a)(2)(ii), regarding gift splitting, is amended to (1) clarify that an agent can make a gift of the principal's assets up to twice the amount of the annual exclusion if the principal's spouse indicates a willingness to “split” gifts and (2) add a provision that limited gifts to a “family unit” (which is a child and a child's descendants) can be equalized even if this means exceeding the available annual exclusions and thus using a portion of the principal's cumulative lifetime gift exemption or paying gift tax if there is an insufficient amount of such exemption remaining.
Subsections (d) (power to claim an elective share) and (e) (power to disclaim any interest in property) are amended to eliminate as unnecessary the references to adjudication, since 20 Pa.C.S. § 102 defines an incapacitated person as “a person determined to be an incapacitated person under the provisions of Chapter 55 (relating to incapacitated person).” The determination under Chapter 55 necessarily involves an adjudication.
Subsection (h) (power to authorize admission to medical facility and power to authorize medical procedures) is repealed, in light of Chapter 54.
Subsection (k)(4) (power to engage in stock, bond and other securities transactions) is amended to specify that the agent may also join in any consolidation, dissolution or liquidation, thereby making the provision more parallel to 20 Pa.C.S. § 7780.6(a)(13), concerning the illustrative powers of a trustee under the Pennsylvania Uniform Trust Act.
Subsection (p) (power to engage in insurance transactions) is amended to include annuity transactions. Paragraph (3) is amended to give an agent the authority to change a beneficiary designation but only as permitted under § 5601.2(c.1) and (c.2), which concerns actions that change an estate plan and that may or may not require court approval.
Subsection (q) (power to engage in retirement plan transactions) is amended to give an agent the authority to change a beneficiary designation but only as permitted under § 5601.2(c.1) and (c.2), which concerns actions that change an estate plan and that may or may not require court approval.
Subsection (u.1) (power to make anatomical gift) is repealed, in light of Chapter 54.
Subsection (u.2) is new and defines the power to operate a business or entity.
Subsection (u.3) is new and defines the power to provide for personal and family maintenance.
§ 5604. Subsection (c)(1) is amended to delete the word “adjudicated” (with respect to an incapacitated principal) in the first sentence and to delete the second sentence, which provides that the guardian has the same power to revoke or amend the power of attorney that the principal would have if the principal were not incapacitated.
Subsection (c)(3) is new and requires the court to determine whether, and the extent to which, the incapacitated person's durable power of attorney remains in effect and include that determination in its guardianship order.The 2010 POA Report also contains the following proposed amendments to 20 Pa.C.S. Chapter 54 (health care):
Subsection (d.1) is new and specifies that except as otherwise provided in the power of attorney, an agent is not required to disclose receipts, disbursements or transactions conducted on behalf of the principal unless ordered by a court or requested by the principal, the principal's guardian, another fiduciary acting for the principal, a governmental agency having authority to protect the welfare of the principal, or (upon the death of the principal) the personal representative or successor in interest of the principal's estate.
§ 5610. A third sentence is added clarifying that the court may assess the costs of the accounting proceeding as it deems appropriate, including the costs of preparing and filing the account.
§ 5612. This new section authorizes the court to order an investigation, appoint a guardian ad litem, make a referral to an appropriate agency or take any other appropriate action regarding allegations of financial abuse or mismanagement against a principal by his or her agent under a power of attorney. Any such order is made upon petition by an appropriate party and a reasonable showing of the financial abuse or mismanagement. However, the court may consider information not only from the formal petition but from other sources (such as from a report by a social service agency or from other communications).
§ 5613. This new section provides that venue of any matter pertaining to the exercise of a power by an agent acting under a power of attorney is in the county where the principal is domiciled, a resident or residing in a long-term care facility. A court may decline to exercise jurisdiction if it determines that a court of another county or state is a more appropriate forum, in which case the court shall either dismiss the proceeding or stay the proceeding upon the condition that a proceeding be promptly commenced in another county or state. The court may impose other conditions as well. This new section provides the court with maximum flexibility regarding the relevant and important factors to be used in determining whether to exercise jurisdiction.
§ 5614. This new section supplements Chapter 56 with the common law and principles of equity.
§ 5422. The definition of “health care decision” is amended to include decisions regarding (1) an individual's admission to a facility or entering into agreements for the individual's care and (2) after the individual's death, making anatomical gifts, disposing of the remains or consenting to autopsies.I was privileged to be a member of the drafting committee (the "Subcommittee on Guardianships and Powers of Attorney"), chaired by John J. Lombard, Jr., Esq., Chair, which included: William R. Cooper, Esq.; Jay C. Glickman, Esq.; Neil E. Hendershot, Esq.; The Honorable Anne E. Lazarus; James F. Mannion, Esq.; John F. Meck, Esq.; Michael J. Mullaugh, Esq.; The Honorable Paula Francisco Ott; William Campbell Ries, Esq. and Robert B. Wolf, Esq. In addition, The Honorable Calvin S. Drayer, Jr. and The Honorable Stanley R. Ott were invited to participate in the subcommittee's review and discussion process.
§ 5456. Subsection (a) is amended to specify that the health care agent's power includes the power to authorize admission to a facility or enter into agreements for the principal's care.
§ 5460. Subsection (a) is amended to repeal the last sentence, which provides that the guardian has the same power to revoke or amend the appointment of a health care agent that the principal would have if the principal were not incapacitated, but the guardian may not revoke or amend other instructions in an advance health directive absent judicial authorization. Subsection (a) is also amended to add statutory language providing that in its guardianship order and determination of a person's incapacity, the court shall determine the extent to which the health care agent's authority to act remains in effect.
Update: 03/26/10:
On Friday, March 26, 2010, the Pittsburgh Post-Gazette published an article by Dennis B. Roddy entitled Reforms aimed at power-of-attorney abuses: State commission proposes changes to curb cheating, which noted issuance of the 2010 POA Report and a legislator's intention to introduce legislation based upon its recommendations:
A Pennsylvania government study commission has proposed legal reforms to curtail power-of-attorney abuses that have cheated the elderly, the disabled and their heirs.
The 222-page report includes draft legislation and is the result of an 18-month study ordered by the state House after a 2007 series of articles in the Post-Gazette. The articles revealed gaps in the law that had allowed attorneys and family members to divert savings and pension benefits to their advantage.
"The majority of powers of attorney work very well, but when they don't work they cause tremendous problems," said Superior Court Judge Anne Lazarus, a member of the advisory committee on estate law that proposed the reforms to the Joint State Government Commission.
The study was ordered after the House passed a resolution by State Rep. Jesse White, D-Washington County, who said he was incensed by reports of POA abuses detailed in the newspaper during 2007.
"I will almost certainly be introducing some sort of legislation for comprehensive power of attorney reform," Mr. White said. Initially, Mr. White and several others had suggested the commission explore adopting a nationwide standard called the Uniform Power of Attorney Act.
The committee did a side-by-side comparison of Pennsylvania law with the proposed uniform act.
"We found that our structure was sound and that we addressed most issues already," said Neil Hendershot, a Harrisburg estate lawyer and expert on POA.
Instead, the committee opted for alterations of the current Pennsylvania law. * * *
