Pennsylvania law regarding powers of attorney (POAs) changed in 2015. Here are a few thoughts on using POAs and what to expect.
1. Have current legal documents.
Banks and other financial institutions don't like old documents. Banks have people whose job it is to make sure that your legal documents comply with the law as well as their own internal regulations. They will go over your documents with a fine-tooth comb, looking for flaws. Typically, when somebody needs to use a POA, they really need to use it. Why take the chance of rejection by using an invalid document?
2. Remember, it's not your money.
If you are the person using a POA for someone else's benefit, you are the "agent" and the other person is the "principal". The agent must always do what is in the best interests of the principal and this includes a complete separation of the principal's money and property from your money and property. If you commingle the principal's money with yours, it's a sure way to become the target of legal action by your relatives or even criminal prosecution. Saying things like, "Dad wanted me to have the cabin, so I deeded it to myself", or "Mom told me I could pay my mortgage with her money" are poor excuses in court. Include your siblings in decision-making as much as you can. Family meetings are helpful and we have them in my office all the time. Better to meet with your siblings on an amicable basis than in a courtroom.
3. Keep detailed records and "elephant tracks".
If you're anything like I am, you probably don't remember the details of your own checkbook from last year, let alone a few years ago ("Hmm, what did I buy at L.L. Bean in July 2014?"). When I am acting as an agent under POA, however, I keep meticulous notes. I call these "elephant tracks" and they include memos to my own file about what was done and why. If your actions as an agent are ever challenged, you can count on being required by court order to produce a fiduciary accounting, which is a detailed summary of every transaction you made as agent. Why did you sell the IBM stock and buy Microsoft in 2013? Are you prepared to do this?
4. Be prepared to be challenged.
Banks don't like POAs at all. They are afraid of fraud and being sued, so they take all kinds of steps to make it difficult to use POAs. This can be frustrating when all you are trying to do is take care of your elderly mother. Consider a trust. While creating a trust costs more than a simple POA, trustees of trusts are given much greater credibility in the financial world than agents using POAs.
Absent the proper legal documents, you have no authority to act for another person. The law provides a default, although most people won't like it. If you don't have a POA and the person you want to take care of is incapacitated, you'll probably end up in a guardianship proceeding in court. This is generally a bad idea because it's expensive, time-consuming, and places your family's affairs in the hands of strangers. Do you want your mental health and finances to be discussed in a courtroom by lawyers, doctors, and social workers? It's much better to take care of things privately.
If you don't plan, the government plans for you.
© Copyright 2017 Kevin F. Danyi, JD, LLM
Here's the usual caveat, without too much legalese: this little article isn't legal advice, nor does it create an attorney-client relationship. But then, you're smart: you already knew that. Have a great day!