The Importance of a Power of Attorney
By Thomas A. Boulden, Esquire
The Commonwealth of Pennsylvania recognizes Powers of Attorney under the provisions of Chapter 56 of the Probate, Estates and Fiduciaries Code. A valid Power of Attorney is an integral part of an estate plan. Until recently, many Powers of Attorney in the Commonwealth of Pennsylvania did not contain any limits on gifting or other protections which are now in place due to changes in the laws. These changes were made to protect the Principal of the Power of Attorney ( the person signing or giving the Power of Attorney) and clarify the duties owed by the Agent (the person to whom the Power of Attorney is given) to the Principal and the Principal’s estate.
One fundamental change was the adding of a requirement that a notice is to be signed by the Principal to the Power. This notice acknowledges that the Power of Attorney has been explained to the Principal and that they are aware of the extent of the powers given to the Agent. The Agent has to acknowledge that they will exercise the Power of Attorney, only for the benefit of the Principal; keep the assets of the Principal separate from their own assets; exercise reasonable caution and prudence in their use of the Power of Attorney and keep full and accurate records of all activities, receipts and disbursements made on behalf of the Principal.
One of the more sweeping changes for the protection of the Principal was the limiting of gifts which an Agent could make. Previously agents often had an unlimited ability to make gifts, including to themselves. The new rules placed restrictions on gifts and do not allow Agents to favor themselves over others. While gifts are allowed, they have to be specifically permitted by the Principal.
One of the most infrequently used, but important provisions in Powers of Attorneys are the nominations of guardians, if the Principal become incapacitated. The Principal is permitted to nominate the Agent in the Power of Attorney as the person who will become their guardian of the estate and person, if they become incapacitated. This nomination of guardians provides guidance and certainty about the Principal’s choices, if the Principal becomes incapacitated. Having these provisions in a power of attorney often eliminates the need to have someone declared incapacitated and the resulting interfamily battles over who will be in charge.
The guardian of a person has the duty to assert the rights in interest of the incapacitated person and make determinations as to where that person will live and manage their personal and day to day affairs. The guardian of the estate is in charge of the finances, the paying of bills and other financial decisions. If there are separate guardians of the estate and person then they are to work together but the same person can be named as both the guardian of the estate and person. When someone is declared incapacitated the court monitors the performance of both guardians.
Powers of attorney are an important but sometimes overlooked area of estate planning and depending on changes in the circumstances of the individual and their families there may be a need to update or review Powers of Attorney more frequently than Wills. A Power of Attorney is a separate document from a Will and updating your Power of Attorney does not necessitate changes to your Will or other estate plans. Most estate planning attorneys will review your estate planning documents to ensure they are current and advise you if any changes need to be made.
If more information is desired, or a review of your estate planning documents is desired please contact one of the estate planning attorneys at Timoney Knox.