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power of attorney is a legal document through which you authorize The durable power of attorney will be the most important legal document for you and your family if you ever suffer an accident or illness that leaves you unable to handle your personal or financial affairs. Through a power of attorney you decide who will be authorized to make decisions for you if you ever are incapacitated. And you specify exactly what actions your agent will be allowed to take on your behalf. If you did not create an adequate power of attorney while you were competent, it is likely your family will have to go to court to have a guardian appointed for you. Guardianship proceedings are expensive and time consuming and give you no control over who will be appointed to act for you or what your guardian will be allowed to do. In some ways a power of attorney is more important legal planning tool than a will. While it is a good idea to have both documents, the power of attorney can actually control what happens to you and the things you own during your lifetime. A will just says what happens to the things you own after your death. Many people think that a power of attorney is just a simple document-that a one or two page standard form that says something like "my agent can do anything I can do myself" is all they need. A lot of people have simple powers of attorney with language like that. But the law in Pennsylvania has been unclear as to whether such a simple power of attorney gives your agent the actual legal authority to handle many of the issues that might someday become important to you, such as making medical decisions, or giving away things you own in order to save taxes or limit nursing home costs. Court decisions in Pennsylvania have only added to the confusion. Another problem with powers of attorney has been that they have been abused. There are frequent instances of vulnerable older individuals, perhaps as a result of dependency or declining mental abilities, giving their power of attorney to an untrustworthy person. A senior's finances can be easily taken advantage of by someone with a power of attorney. Many elder law attorneys and prosecutors think that this kind of elder abuse is rampant. But these cases are hard to prosecute partly because of the confusion in the law regarding what an agent with power attorney can do. Now in Pennsylvania Legislature has stepped in and passed a new law that clears up some of the confusion about an agent's authority. It should allow for easier prosecution in cases of abuse. The new law, Act 39, was signed on October 12, 1999 by Governor Ridge. There are 3 major changes contained in the new law. First, beginning April 12, 2000 all powers of attorney should begin with a warning in capital letters that alerts the principal that the document being signed may give the agent significant control over the property and finances owned by the principal. The principal is to sign this warning notice. Second, all agents must sign a document in which they agree to abide by strict standards in handling the principal's affairs. The agent has no authority to act until this form is signed and has been attached to the power of attorney. By signing the form the agent agrees to act for the benefit of the principal, keep the assets of the principal separate from the agent's, act with reasonable caution and prudence, and keep a full and accurate record of all actions, receipts, and disbursements made. Finally, beginning with documents signed on December 12, 1999 an agent is definitely not authorized to give away any of the principal's assets unless the gift is specifically permitted by clear language in the power of attorney. For documents signed prior to December 12, 1999 the law remains unclear as to whether the agent can make gifts unless gifting is specifically mentioned. Unfortunately, this well intended revision of the law creates a number of traps, especially for families of incapacitated older persons. While the power to make gifts can easily be abused, families of incapacitated persons often need this power. Gifting (transferring assets for less than full value) is a fundamental tool for the preservation of assets from health care expenses and state and federal death taxes. Take, for example, the situation of a wife who is caring for her stroke or Alzheimer's debilitated husband from home. The husband may be able to qualify for state paid Medical Assistance home care benefits to help keep him at home, but to qualify he is allowed to own no more than $2,400 in available assets. The normal procedure would be to transfer the husband's assets to the wife, so that the husband can qualify. But under the new law the wife may not have the power to make such transfers to herself unless her husband, while competent, signed a power of attorney which allows such gifts. Without power of attorney the wife may not even be able to sell jointly owned assets like real estate or stock, mutual fund or other investments. Agents must now follow the new law's standards of acting with reasonable caution and prudence, and keeping a full and accurate record of all actions, receipts, and disbursements made. As a result of these changes, the job of serving as agent will become a lot more complicated and problem filled. Most family members are not accountants, and it is likely that many family members, serving without compensation as agent, for an elderly parent, will not keep a "full and accurate record of all actions, receipts, and disbursements". The new law is not clear as to what sort of penalties will apply to agents who fail to comply with these new standards. In some situations of financial abuse the penalties may include criminal liability, i.e., for making gifts without authorization; in other cases the liability may be civil, i.e. paying money damages. It is also possible that the state may try to overturn inadequately authorized gifts to family members so that the state can recover for the cost of any Medical Assistance benefits it has paid. In many family situations, the principal will not want the agent to be burdened with the record keeping mandated by the new law. The record keeping and many of the other new requirements can be waived by the principal when creating the power of attorney, but the waiver must be explicit. Likewise, the inserting proper language in the document the principal can authorize the agent to transfer assets and take other actions to preserve assets from long term health care costs and taxes. Here again, the agent's authority to do this kind of planning must be clearly specified in the document. The effects of the new power of attorney law are likely to be far reaching. We can expect to see more prosecutions and convictions for financial abuse of the elderly. There will be increasing resort to the court system by families of incapacitated individuals who did not sign adequate powers of attorney. Without the power to do what needs to be done, filing guardianship proceedings may be these families' only alternative. There will be lawsuits filed against agents over whether they met the standard required by the new law. This litigation will frequently be brought by family members against each other. People will need to spend more time with their lawyers talking about what should be included in their powers of attorney. With its new complexities and traps, the new law puts a premium on the well considered, expertly drafted power of attorney. The preparation of this critically important legal tool just got a lot more difficult. People who have already signed powers of attorney may want to review their documents. Does your document adequately address the issue of gifting? Is your agent given the power to make the health care decisions you would want made, or do you have a separate document that covers medical matters? Do you have a back up agent named, if your first choice cannot serve? This may be a good time to talk to your lawyer about the power of attorney options that are available to protect you and your family.
If you have any questions about
your durable power of attorney or we can assist in any way, please do
not hesitate to contact
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