When it comes to estate planning there are two especially important types of Power of Attorneys (POA) used in Pennsylvania Estate Planning. One is known as a Healthcare Power of Attorney (HPOA) which allows an individual to appoint someone to make healthcare decisions when they are unable to do so themselves. The one I am writing about today is the Financial Power of Attorney (FPOA) (also known as a General Durable Power of Attorney) which allows an individual to appoint an agent to make non-healthcare decisions for someone in the event they are unable to do so themselves. There is another type of Power of Attorney known as a Limited Power of Attorney (LPOA) that isn’t used frequently in connection with Estate Planning frequently but is used for limited powers for a short period of time regardless of reasoning.
Creating a Power of Attorney
Chapter 56 of Title 20 of the Pennsylvania Probate, Estates and Fiduciaries (“PEF”) Code explain the primary provisions concerning the making, execution, and interpretation of financial and medical powers of attorneys in Pennsylvania. Additionally, it provides the laws that governs the conduct of, and the authority that may be granted to, the agent of the principal pursuant to the POA.
A Financial Power of Attorney establishes a fiduciary relationship between the Principal (the person creating the document) and the Agent (the person acting on behalf of the principal). In order to create a valid Pennsylvania Power of Attorney it must at minimum meet the following requirements:
- It must be dated and signed by the principal
- It must be acknowledged before a notary
- It must be witnessed by two individuals over the age of 18 and they must NOT be the agent listed in the FPOA.
- Section 5601(c) has been amended to requires slightly modified language to be included in the notice to principal that is generally required by the statute to be set forth at the beginning of a POA.
- The statute requires that the notice be in all capitalized text and be signed by the principal.
IMPORTANT: In the absence of the statutory notice, an agent acting under the POA will have the burden of demonstrating that the exercise of the agent’s authority is proper.
Before commencing to act under a POA, the agent must sign an acknowledgment containing substantially the language set out in PEF Code Section 5601(d).
PEF Code Section 5601(b)(3)(i) requires that POAs be notarized before a notary public or other official authorized to take acknowledgments. The notary may not be an agent named in the POA.
General POA vs. Limited POA
For estate planning purposes we always recommend that clients to execute a full general POA for incapacity planning purposes. However, limited powers of attorney may also be executed to deal with specific situations where the principal may be unavailable, but not necessarily incapacitated. Power of Attorneys can be created to work on a single brief period of time or a single situation. Sometimes Powers of Attorney are created to handle a real estate transaction closing on a day that is certain. Other times a limited power of attorney may allow someone to only deal with banking or investment accounts and no other purpose. The notice, acknowledgment by agent, and other requirements will still apply to a limited POA in the same manner and to the same extent as a full general POA.
Can the Agent Be Paid?
The short answer is generally yes. The PEF Code specifically states that an agent is entitled to reasonable compensation for services that are actually assumed and rendered in the capacity as agent absent a provision to the contrary contained in the POA instrument. In many instances, principals may not want to pay their agents if they are a spouse or other relative. Regardless, the agent is also entitled to be reimbursed for any expenses incurred on behalf of the principal, including advancements made in respect of the principal’s own expenses. The POA should expressly provide for such limitation if that is the principal’s intent.
In conclusion, Power of Attorneys are an absolute necessity as part of your estate plan. If you do not have a Financial Power of Attorney currently or your existing Power of Attorney is more than 3 years old, you should reach out to an attorney at Rick Stock Law for assistance in revising your estate plan.