Keep up with changing law to hold control of your power of attorney
By Melanie Scaringi of Scaringi Law posted in Family Law on Thursday, October 22, 2015.
Thumbnail image for Melanie Walz Scaringi.jpgPower of attorney documents grant an agent authority to conduct business, including financial transactions, on the principal's behalf. A durable power of attorney gives this authority even after the principal becomes incapacitated.
Many people intend for their power of attorney documents to be used only after they become incapacitated. These vital legal documents hold the power to put people's minds at ease, ensuring that necessary tasks such as paying bills and making key financial decisions will be handled according to their wishes, even when they are unable to do so themselves.
But that only happens if the power of attorney document is deemed valid by the bank where the principal's assets are held.
In January, Pennsylvania enacted sweeping amendments to its power of attorney statutes to provide additional safeguards against abuse. These amendments modify the default powers granted to an agent and enumerate the fiduciary duties power of attorney agents must accept and abide by in order to act as agents.
Despite lawmakers stating that power of attorney documents enacted before the changes would still be valid, many banks and financial institutions have balked at agreements written before the amendments went into effect. When a bank does not accept a power of attorney that was validly prepared before the amendments to the law went into effect, a document that is technically legally valid becomes ineffective in practice.
Don't let this happen to you.
The law has changed: Be safe and update your power of attorney
I recommend all my clients update their power of attorney documents to reflect Pennsylvania's new law. It is especially important to be mindful of this law if you intend for your agent to wait to use your power of attorney after you are incapacitated. You must have mental capacity to grant power of attorney to an agent. It is better to update your documents now than to wait and only find out your power of attorney is rejected when you are no longer able to create a new one.
Your updated power of attorney documents will strengthen the bond at the heart of the power of attorney relationship - namely, the loyalty and fiduciary responsibility the agent has to the principal. While these duties were always implied, many power of attorney relationships were abused in the past.
Now, agents entering into a power of attorney relationship must expressly accept fiduciary duties, including but not limited to promising to act in good faith, act in the principal's best interests, not commingle funds, and maintain records.
Beyond these benefits, updating your power of attorney will ensure that the document will be honored by your financial institution.
An aging person's circumstances can change quickly - often far faster than they realize. This is why I recommend never putting off important legal decisions regarding powers of attorney, wills, estate planning, trusts, living wills and healthcare agents.
Caught in a Catch-22
When a bank rejects a power of attorney and the person who granted the powers no longer has the capacity to execute a new agreement, all is not lost. We can assist with getting the power of attorney honored.
Pennsylvania grandfathered in power of attorney documents drafted and executed before the 2014 amendments, many of which took effect in January, 2015. Nevertheless, this hasn't stopped some banks and financial institutions from rejecting power of attorney documents that were executed as recently as 2013 and 2014.
Once again, updating your power of attorney document is the easiest and quickest course to ensure it will be honored. While you are updating power of attorney documents, it might be a good time to review all of your estate planning documents and choices. I recommend this review and update every five to seven years, or more frequently if your circumstances have changed.
These estate planning documents are meant to be living documents that you can and should update several times during your life as your circumstances and the laws change. Indeed, a will is designed to outlive you, making sure your final wishes are fulfilled. The knowledge that your estate planning documents are current and accurate can provide enormous comfort and peace of mind to you and your loved ones.
Isn't it time to update your peace of mind?