Durable General Powers of Attorney (“DGPOAs”) are fundamental estate plan documents used to allow a person (the “Principal”) to appoint another person (the “Agent”) to exercise certain powers on behalf of the Principal relating to financial matters, for the benefit of the Principal. When properly drafted and executed, DGPOAs may help avoid the necessity of seeking a guardianship for an incapacitated person and allow a trusted family member or professional fiduciary to carry out the Principal’s wishes throughout the ageing process.
In 2014, Pennsylvania enacted changes to the law governing Powers of Attorney (Act 95 of 2014, amending Chapter 56 of the Probate Estates and Fiduciaries Code, 20 Pa.C.S.A §5601, et. seq.). The changes became effective January 1, 2015.
Whether employing a DGPOA in your own estate planning or evaluating the use of one as a dealer, these changes have significant impacts. In brief, the changes made by Act 95 include the following:
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Required Notices and Acknowledgements for DGPOAs executed after January 1, 2015 have been revised.
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DGPOAs executed on or after January 1, 2015 must be witnessed by two people (neither of whom is a named Agent), and must be notarized.
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Certain powers that may be granted by the DGPOA are considered ‘hot’ powers and must be expressly included in the Powers of Attorney to be authorized. These include the power to (a) make gifts; (b) change beneficiary designations on retirement plans, annuities, and life insurance policies; (c) disclaim property; (d) amend or revoke a revocable trust; and (e) create or eliminate a survivorship interest in property.
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Third parties processing transactions under a DGPOA (for example, banks, brokerage firms, auto dealers, and real estate agents) may require the Agent and/or legal counsel for the Agent to provide certification as to the validity of the DGPOA, an English translation of DGPOAs executed in foreign languages, and/or an opinion as to the legal authorization to exercise certain powers. The cost to meet these requirements is generally borne by the Principal.
These changes have produced far more scrutiny of DGPOA documents by banking and investment institutions and other third parties. While Act 95 did not void Powers of Attorney executed before 2015, it has made the use of those documents more challenging. Technically speaking, a DGPOA executed before 2015 will be effective if it comported with the law in effect at the time it was originally signed. However, the current provisions of the law serve as a ‘flag’ for older documents and put the burden on the Agent and estate planning counsel for the Principal (at the Principal’s expense) to provide supplemental information to validate the older document. Using a Power of Attorney for an incapacitated Principal can be particularly difficult.
We encourage clients to review existing documents as part of their estate plan and determine if they should execute an up-to-date version. For clients with Powers of Attorney executed before April 2000, we believe that it is critical that new documents be signed if possible. For clients with DGPOAs executed after April 2000, while many of these documents remain effective, we recommend a review of the document to ensure that it substantially meets the current requirements. Third parties with questions about DGPOAs executed before 2015 may also wish to seek guidance from counsel.
