Thursday, June 19, 2014

Pennsylvania Revises Law on Powers of Attorney

Pennsylvania has enacted broad changes to the law governing powers of attorney. House Bill 1429 (HB 1429) was unanimously passed by the state House and Senate and signed into law by the Governor on July 2, 2014 (as Act 95). It represents the culmination of over 3 years of work and negotiation by interested groups, including the Pennsylvania Bankers Association, the Pennsylvania Association of Elder Law Attorneys (PAELA), the Pennsylvania Bar Association, the Joint State Government Commission, and the legislative staffs of Senator Greenleaf and Representative Keller.
HB 1429 revises Title 20 Chapter 56 (20 Pa.C.S. §§ 5601 - 5612) – the law which governs powers of attorney (POAs) used for financial and property transactions. [Sections 5601 (e.1) and (e.2) provide limitations on the applicability of certain sections of Chapter 56 in commercial transactions and in powers of attorney that provide exclusively for health care or mental health decision making.] Many of the changes draw on the Uniform Power of Attorney Act. But HB 1429 includes some provisions that are unique to Pennsylvania law.
The purpose of this article is to provide an overview of some of the changes made by the new law that are significant from the perspective of an elder law attorney. Chapter 56, as revised by HB 1429, is complex law which requires careful study by any attorney who drafts POAs in Pennsylvania.


Section 1 of HB 1429 modifies the execution requirements for POAs. For POAs executed on or after January 1, 2015:

  • A POA may be signed by another person on behalf of the principal only if the principal is unable to sign and specifically directs the other individual to sign. [§ 5601(b)(1)]

  • The signature or mark of the principal must be acknowledged before a notary public or other individual authorized to take acknowledgments.  [§ 5601(b)(3)(i)]

  • All POAs must be witnessed by two individuals neither of whom is the agent, or an individual who signed the POA on behalf of and at the direction of the principal, or the notary or other person authorized to take acknowledgments before whom the POA is acknowledged. [§ 5601(b)(3)(ii)]

  • The Notice that the principal is required to sign under 20 Pa.C.S. § 5601(c) is modified. Language is added to warn that the document may grant the agent the power to give away the principal’s property or change how the property is distributed at death. The principal is advised to seek the advice of an attorney at law before signing the POA.  

  • The acknowledgment form that the agent signs under 20 Pa.C.S. § 5601(d) is revised to specify that the agent must act in accordance with the principal’s reasonable expectations to the extent that the agent actually knows them and, otherwise, in the principal’s best interest. The form notes that 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.

Note that the above requirements of a notary, notice, agent’s acknowledgment (and the provisions in section 5601.3 relating to an agent’s duties) do not apply to a POA which exclusively provides for making health care decisions or mental health care decisions. [See 5601(e.2)].

Agent’s duties

Section 5601.3 relates to an agent’s duties. Section 5601.3(a) specifies the general rule: an agent must act in accordance with the principal’s reasonable expectations to the extent actually known by the agent and, otherwise, in the principal’s best interest. The agent must act in good faith (which means “honesty in fact”) and only within the scope of authority granted in the power of attorney.
In addition to the general rule duties, section 5601.3(b) lists other duties that can be modified or waived entirely in the power of attorney. These default duties include acting loyally for the principal’s benefit; keeping the agent’s funds separate from the principal’s (with some stated exceptions); 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.
The lawyer drafting a POA will want to carefully consider whether any or all of these default duties should be modified or waived entirely. For example, if the client wants his child/agent to have the authority to commingle funds with those of the principal after the date of execution of the POA, this authority can be provided in the document.  
The agent’s default duty to attempt to preserve the principal’s estate plan is of some significance to elder law attorneys who are called on to advise agents about the propriety of actions intended to qualify the principal for Medicaid, VA benefits, or some other program. Transfers of assets may facilitate such eligibility.
Section 5601.3(b)(6) specifies that the agent shall attempt to preserve the principal’s estate plan, to the extent actually known by the agent, if preserving the plan is consistent with the principal’s best interest based on all relevant factors, including all of the following:
(i)  The value and nature of the principal's property;
(ii)  The principal's foreseeable obligations and need for maintenance.
(iii)  Minimization of taxes, including income, estate, inheritance, generation-skipping transfer and gift taxes.
(iv)  Eligibility for a benefit, a program or assistance under a statute or regulation.  
Elder law attorneys know that many of their clients want to authorize their agents to have the authority to act in a manner that will facilitate eligibility for public benefits programs. Thus, inclusion of language which recognizes that public benefits eligibility is an appropriate factor to be considered by the agent was a goal of PAELA. The drafters of the Uniform Power of Attorney Act agree. Section 5601.3(b)(6)(iv) is drawn directly from section 114(b)(6) of the Uniform Act.

Nonliability of an agent

Section 5601.3(c) puts limitations on the liability of an agent. 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. And, absent 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, disbursement or transactions

Section 5601.3(d) puts limits on the required disclosure of receipts, disbursements or transactions conducted by an agent on behalf of a principal. These limits can be modified in the POA.

Authority that requires specific and general grant of authority

Section 5601.4(a) limits the power of an agent to take certain actions unless authority is expressly granted in the POA and is not prohibited by another instrument. These “hot power” or “express grant” actions that must be specifically authorized are:  
Section 5601.4(b) further limits the exercise of hot power authority by agents who are not in certain family relationship with the principal. However, a POA can be written to specifically opt out of these limitations.
Sections 5601.4(a) and (b) will require careful drafting by the lawyer whose client wants to authorize their agent to have one or more hot powers.  

Limited gifts

Section 5603(a.1) redefines the power to make limited gifts. Unless the power of attorney otherwise provides, language in a power of attorney to make limited gifts or language granting general authority with respect to gifts only authorizes the agent to make gifts in the limited situations described in this section.

Third party acceptance, reliance and liability

Section 5608 addresses the PA Supreme Court decision in Vine v. Commonwealth State Employees’ Retirement Board, 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 POA without actual knowledge that the POA is void or voidable, has expired, or that the agent is exceeding the scope of his authority. HB 1429 legislatively reverses the Vine court’s interpretation of section 5608.
Section 5608 will now provide broad protection for banks and other third parties who in good faith accept a POA. For example, a person who in good faith accepts a POA without actual knowledge that a signature or mark is not genuine may, without liability, rely upon the genuineness of the signature or mark [section 5608(c)].
Section 5608 goes well beyond a “Vine fix” and provides third parties who are asked to accept a POA with a number of options including the right to request additional information and documentation such as an agent’s certification of factual matters, an English translation of the document, and an opinion of counsel that the agent is acting within the scope of the authority granted.
Section 5608.1 rewrites the law on the subject of the liability of a third party for refusal to accept a POA. (Elder law attorneys may prefer the old law on this issue, but it is now history). Sections 5608.1(b) and (d) list various circumstances under which acceptance may not be required.  
Under section 5608.1(c) a person who refuses to accept a POA in violation of section 5608 shall be subject to:
Section 5608.2 provides for actions taken by employees of third parties. 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.

Effective date

The amendment or addition of §§ 5601(f), 5608, 5608.1, 5608.2, 5611 and 5612 take effect immediately upon the Governor’s signature. The remainder of the sections of the new law will take effect on January 1, 2015.

Monday, June 9, 2014

Your Survivors Will

“A man's dying is more the survivors' affair than his own.” ~Thomas Mann, The Magic Mountain
Many people put off the preparation of a Will because of the discomfort they feel when thinking about their deaths. And it’s true that preparing a Will forces us to contemplate the world as it will continue on without us.
But, one way or another, the things that we own must pass on to others after our deaths. We can plan for that transition, and try to see that it happens in a positive and beneficial manner. Or we can fail to plan ahead and let chaos take its toll.
We will be gone – what does it matter?
It probably doesn't matter if we don't care a hoot about what happens to the people in our life after we are gone.
The problem is that if we do care, then we need to recognize that our death has the potential to do serious harm to the people who survive us. Our Will is a document we prepare for our survivors, not for ourselves. Having an up-to-date Will is one of the most important things we can do to protect, care for, and provide for the people we care about the most.

If we have children our Will provides us with the opportunity to name a guardian to care for them (if they are young) and a trustee to protect their inheritances (even if they are adults). If we die without naming a guardian in our Will, a court will appoint one without the benefit of our knowledge and judgment. Without a trust, inheritances may soon be lost to our heirs' improvidence or divorce.  

A Will allows us to select our executor. The executor is the person or institution who will be in charge of finalizing our affairs and distributing our estate. It can be a burdensome job. Our executor collects our assets, arranges for payment of debts and taxes, and then distributes what is left to our designated beneficiaries in accordance with our instructions. 
If we die without a Will, the orphan’s court will have to appoint someone to perform these functions. This might be the last person we would have chosen. 
Without a Will, the identity of our beneficiaries and the amounts they inherit will all be determined by state laws.

In our Will we can take steps to limit the taxes that our heirs will have to pay. And we can leave instructions to help ensure that the right people, get the right inheritances, at the right times. By providing for distribution of our assets in a clear and thoughtful manner, we can avoid the potential for delays and family disputes that can be so hurtful to the people we care about.

A Will is the keystone of most estate plans, but it is not the only planning we need. Most of us own assets that will pass to others without regard to the provisions of our Will. 
Life insurance policies, IRAs and other retirement plan accounts, annuities, and the like, will be distributed based upon their beneficiary designations, not our Will. These designations may have been created decades ago, and need to reviewed and updated as appropriate. Assets that we own jointly with another may pass "by right of survivorship" to the joint owner. 
We need to consider the effects of all of these "non-probate" arrangements to make sure that our plan best meets our family’s unique circumstances. An estate planning and elder law lawyer can help make certain that we do not miss any important elements in preparing our estate plan. 
Even if we already have a Will, if our family situation has changed, or our planning has not been reviewed and updated in the last five years, we can do our loved ones a great kindness by taking care of this most important task.  
Although we don’t want to think about dying, this is just too important to put off.  
“We say that the hour of death cannot be forecast, but when we say this we imagine that hour as placed in an obscure and distant future. It never occurs to us that it has any connection with the day already begun or that death could arrive this same afternoon, this afternoon which is so certain and which has every hour filled in advance.” ~Marcel Proust

Sunday, June 1, 2014

Underappreciated Senior Centers Offer Valuable Services

In 1965 Congress enacted the Older Americans Act (OAA) to support community social services for older persons. The OAA established the Administration on Aging and state aging agencies in each state. As a result, each community in Pennsylvania is now served by a local area agency on aging (AAA).  
Title III of the OAA provides state and community grants for many different social service programs. These include meals, health promotion, caregiver support, and senior centers. The programs are an investment in the health and independence of seniors and are intended to help older adults remain in their homes and communities for as long as possible.  
Title III grants are provided to state agencies on aging like Pennsylvania’s Department of Aging and to local AAAs. Pennsylvania has 52 AAA service areas that cover all 67 counties. These agencies are charged with coordinating social service programs for older people such as nutrition services, family caregiver support, and disease prevention and health promotion activities.
Title III funding is designed to provide “seed money” for programs which states supplement with other funding sources. In Pennsylvania, lottery and slots revenues fund senior support programs such as prescription drugs, rent and tax rebates and “meals on wheels.” 
Title III programs are provided at multipurpose senior centers, senior high-rises, retirement communities and other appropriate locations throughout the state.

Senior Centers

In 1972, the OAA was amended to provide funding for senior centers. Currently, 356 Pennsylvania senior centers receive funding through the OAA. Senior centers also receive financial support from other sources, such as local organizations, private grants, and local municipalities.
Meals are the core service at many senior centers. But senior centers provide an entry and delivery point for a wide array of programs and services that help older adults “age in place.” Services commonly offered at senior centers include: 
  • Health and wellness programs
  • Arts and humanities activities
  • Intergenerational programs
  • Employment assistance
  • Community action opportunities and social networking opportunities
  • Transportation services
  • Volunteer opportunities
  • Educational opportunities Information and referral
  • Financial assistance
  • Senior rights counseling and legal services
  • Meal and nutrition programs
  • Leisure travel programs

Title III-D Disease Prevention and Health Promotion Services

A senior center may serve as a delivery point for the Pennsylvania Prime Time Health Program which focuses on health promotion and disease prevention. Prime Time Health is funded under Title III-D of the OAA which was added to the law in 1987. Title III-D provides grants for education and implementation activities that support healthy lifestyles and promote healthy behaviors. [See: Administration on Aging: Disease Prevention and Health Promotion Services (OAA Title IIID)]. 
The hope is that by helping seniors prevent and manage chronic diseases and follow healthier lifestyles Title III-D grants will improve quality of life for the older adult and reduce health and personal care costs.
Many program options are available under Title III-D, including fall prevention, chronic condition management, health screenings, exercise and more. Each AAA is responsible for the delivery of at least some of these Prime Time Health Program services in its local area.
In Pennsylvania, special attention is being given to fall prevention. With good reason. Falls are a leading cause of death and disability of individuals who are over age 65. I’ve recently written about one program, Healthy Steps Program Reduces Falls in Older Adults, which is widely available at senior centers. Additional information about that program is available here.
Another Prime Time Health program, Healthy Steps in Motion Exercise for Strength and Balance provides exercise/strengthening and balance improvement. For more information on Healthy Steps in Motion, click here.
A Chronic Disease Self-Management program, (offered in partnership with Stanford University) helps individuals learn methods to better manage chronic disease such as diabetes, heart disease, emphysema, or hypertension. For more information on the Chronic Disease Self-Management programs, click here.
These wonderful free programs are available to Pennsylvanians who over the age of 50. They can enhance quality of life and keep older adults healthy and living in their communities.  

My Two Cents

For decades Pennsylvania senior centers have responded to the needs of older adults. For thousands of seniors they are a primary source for socialization, recreation, meals, and connection with the community.
They serve a varied population that ranges from the frail elderly to the influx of baby boomers now entering their young/old years. The very diversity of the population to be served raises significant challenges. (Some senior centers have been renamed “Active Adult Centers” and seek to attract boomers with Zumba exercise and salad bars. See: ‘Active adult centers’ part of new strategy, July 15, 2013,
But only a small proportion of seniors take advantage of the wide variety of services available at senior centers and other program delivery locations. While it is generally agreed that centers need to modernize, expand services and increase utilization, funding to strengthen them is always in short supply.
I think one relatively easy and low cost method of modernization and increasing utilization would be to raise the internet presence of senior centers and the programs they offer.  
More and more older adults are using the internet. Pew Research reports that a majority of seniors are now online. But many senior centers are not. It can be difficult to find information about the availability of programs. And programs can’t help people who are unaware of them.
So, I would like to see Pennsylvania’s local AAAs establish websites or Facebook pages that provide an updated list the programs available at each of their area senior centers and other program delivery sites. That’s my two-cents.  
For a list of all Pennsylvania senior centers - click here or contact your local area agency on aging for information on the centers in your neighborhood.