By: Jacob H. Kiessling, Esquire
A power of attorney (POA) is one of the three documents commonly used to implement an estate plan (a will and a living will being the other two). At least every five years, an estate plan should be reviewed to consider changes in the laws, your family and financial situation, your intentions regarding fair and equitable distributions under your estate plan and your probate assets (distributed per your will) and non-probate assets (distributed per beneficiary designation or by law).
With medical advances extending our life expectancies and sometimes the period of our mental or physical incapacities, the POA has become an increasingly important tool. Reflecting that fact and for other purposes, Act 95 of 2014 updated the law relating to POAs in Pennsylvania, with a January 1, 2015 effective date. While POAs signed before that date are still legally recognized, some POAs drafted prior to 2015 may no longer have the legal effect and usefulness as originally intended.
The purpose of a POA is to appoint an agent of your choice to act on your behalf with regard to your financial affairs and/or healthcare decisions. An agent is an individual or company (such as a bank) who will handle your financial and medical affairs should you become unable to do so. By appointing an agent while you are of sound mind and have legal capacity, you often can avoid the cost, additional court oversight and complexity of a guardianship proceeding through which the court appoints a guardian of your person and /or estate.
When having a POA drafted by an attorney, there are many considerations that you, the person granting the powers (referred to as the principal), must keep in mind. First, who will be your agent? The powers granted to your agent can be substantial, so you must be sure that your agent is trustworthy and will act in your, not the agent's, best interest.
Second, will you appoint one agent or multiple agents who will act as co-agents? Appointing co-agents who must act jointly can provide a safeguard against any one agent taking actions in his best interests, but co-agents can present problems at banks and other financial institutions due to their reluctance to get caught in the middle of an agent attempting to exercise his powers without the joinder of the other agent(s). Therefore, successor or multiple agents authorized to act alone may be the better choice.
Third, you must determine which powers you want your agent to have. Prior to 2015, many POAs were drafted to grant to the agent the power to do anything and everything that the principal might do on his own behalf. While still possible now, such broad and far-reaching language is no longer legally sufficient. Under the new law governing POAs, certain powers must be specifically authorized in the POA for the agent to have the ability to exercise such powers. These powers are commonly referred to as "hot powers" and include, among others, the power to make gifts, create or change beneficiary designations, delegate authority granted under the POA, or exercise fiduciary powers which the principal has authority to delegate.
Another consideration in creating a POA is the different names the principal has used over the years. Occasionally, individuals have accounts with financial institutions under a variety of names. For example, a principal, John Carl Doe, may have his bank accounts under the name John C. Doe, while his investment accounts may be under the name John Doe. In such a situation, it is important that the POA name the principal as John Carl Doe, a/k/a John C. Doe, a/k/a John Doe. Listing the variations of the principal's name in the POA is important to allow the agent to act on behalf of the principal with regard to each asset held under a different name variation to reduce the risk of a company not accepting the POA.
Mette, Evans & Woodside attorneys can work with you to address these and other considerations as you create or update your power of attorney as part of your comprehensive estate plan.