PA Regulatory & Legislative Update

© Copyright 2014 by K&L Gates LLP. All rights reserved.

Raymond Pepe

PA Regulatory &

Legislative Update

Act 95 of 2014:

New Requirements for Execution of Powers

of Attorney

 Two Witnesses Required

 Notarization of Principal’s Signature or Mark Required

 Modified Notice Form for Signature by Principal

 Modified Acknowledgment Form for Agents

 Apply to Powers Executed On or After1/1/15

REVISIONS TO PRINCIPAL NOTICE

 Revised Fourth Paragraph of Notice

Your agent must [keep your funds separate from your agent's funds.] act in accordance with your reasonable expectations to the extent actually known by your agent and, otherwise, in your best interest, act in good faith and act only within the scope of authority granted by you in the power of attorney. The law permits you, if you choose, to grant broad authority to an agent under power of attorney, including the ability to give away all of your

property while you are alive or to substantially change how your property is distributed at your death. Before signing this document, you should seek the advice of an attorney at law to make sure you understand it.

REVISIONS TO AGENT ACKNOWLEDGMENT

 Revised Third Paragraph

I shall [exercise the powers for the benefit of the principal] act in accordance with the principal's reasonable expectations to the extent actually known by me and, otherwise, in the principal's best interest, act in good faith and act only within the scope of authority granted to me by the principal in the power of attorney.

[I shall keep the assets of the principal separate from my assets. I shall exercise reasonable caution and prudence.

I shall keep a full and accurate record of all actions, receipts and disbursements on behalf of the principal.]

Expanded Immunities

A person who accepts a power of attorney without actual knowledge that the power of attorney or the agent’s

authority is void, invalid or terminated; or that the agent is exceeding or improperly exercising authority, “may, without liability, rely upon the power of attorney as if the power of attorney and the agent’s authority were genuine, valid and still in effect and that the agent had not exceeded and had properly exercised the authority”

Alternatives to Acceptance

 Certification or Affidavit

 Translation

 Opinion of Counsel

 Must be Requested Within 7 Days

 Once Received Action Required Within 5 Days

 May Be Relied Upon Without Liability

 May be Subsequently Requested for Matters Not Previously Addressed

Liability for Failure to Accept

Power of Attorney Arises Unless:

 Certification/Translation/Opinion Not Provided

 Transaction with Principal Not Required

 Transaction Inconsistent with Power of Attorney Law

 Transaction Inconsistent with Any Other Law

 Knowledge of Termination of Power or Agent’s Authority

 Reported Filed Under Older Adult Protective Services Act

 Power Not Subject to PA Law or on Government Form

Actual Knowledge

Based on Knowledge of Employee

Conducting Transaction Unless Employee Acts With Conscious Disregard or Willful Ignorance of the Existence of Facts

MANDATORY DUTIES

Applicable to All Powers Effective 1/1/15



Act in accordance with the principal's reasonable

expectations to the extent actually known by the

agent and, otherwise, in the principal's best interest.



Act in good faith



Act only within the scope of authority granted

Default Duties

Applicable to All Powers 1/1/15 Unless Waived or Modified  Act Loyally for Principal’s Benefit

 Segregate Funds of Principal & Agent

 Not Create Conflicts with Principal’s Best Interest

 Act with Care, Competence and Diligence

 Keep Records of Receipts, Disbursements & Transactions

 Cooperate Health Care Agents

 Attempt to Preserve Principal’s Estate Plan

Limits on Liability of Agent

 Not Liable to Beneficiaries for Good Faith Action

 No Liability Solely Because Agent Benefits From or Has Interests That Conflict With Principal’s If Agent Acts in Principal’s Best Interest

 No Liability for Investment Losses Absent Breach of Duty

 No Liability For Acts of Person Delegated Duties If Person Selected and Monitored With Reasonable Care

Acts that Require Specific Authority

 Gifts

 Intervivos Trusts

 Change Rights of Survivorship or Beneficiaries

 Delegate Authority

 Waive Rights to Survivorship Annuity

 Exercise Principal’s Fiduciary Powers

 Disclaim Property of Powers of Appointment

Act 52 of 2013: Estate & Trust Tax

Amendments Effective 1/1/14

Personal Income Tax Amendments

 Withholding Required for Nonresident Beneficiaries of Estates and Trusts

 Returns Required for Estates and Trusts with PA Source Income

 Statements Must be Issued for Distributions to Resident Beneficiaries

McNeil v. Commonwealth

Jurisdiction to Tax Trusts

PA Lacked Power to Tax Income of Intervivos Trust Created by PA Settlor with PA Beneficiaries if:

 Trust Has No Offices or Activities in PA

 Trustee Not Located in PA

Uniform Adult Guardianship and Protective

Proceedings Jurisdiction Act

Standards For Jurisdiction

 “Home State” Based on Six Months Continuous Presence Has Priority

 Substantial Connection State if No Home State or Home State Declines

 Another State if No Home or Substantial Connection State or Both Decline

Other Provisions

 Procedure to transfer orders

 Orders may be registered in any state and upon registration are enforceable

 Courts authorized to consult with each other to determine whether to take jurisdiction

2015 Power Of Attorney Amendments

Needed To Correct Errors in Act 95

Amendments Needed

 Exempt Commercial Power of Attorney From Notarization and Application of Agent’s Duties

 Allow Attorney Acknowledgments

 Expand Definition of Power of Attorney to

Other Anticipated 2015 Power of Attorney

Amendments

Source of Amendments

 Reintroduction of Senate Bill 621 of 2014

 Efforts to further Conform to the Uniform Power of Attorney Act

 2010 Recommendations of the Decedents’ Estates Advisory Committee

Senate Bill 621 Amendments

 Health Care Agent Powers

 Relationship Between Guardians & Agents

 Add Short Form Power to Operate a Business

 Add Short Form Power for Personal & Family

Maintenance

 Clarify Power to Handle Interests in Estates &

Trusts Includes Authority to Receive Reports

 Authorize Court’s in

Accounting Proceedings to Assess Costs of Preparing and Filing Accounts

Uniform Act Provisions



Standing



Remedies for Breach of

Agent’s Duties



Exoneration of Agents



General Powers of

Agents



Statutory Form Power

DEAC Recommendations



Disposition of Unclaimed Real Estate



Powers of Appointment



Minor Trust Code Amendments



Recodify Charitable Instruments Law

2015 Amendments to Guardianship Law

Standard Powers of Guardians

 Insure Property

 Action Against Other Guardians  Employ Custodians  Take Deed-in-Lieu  Manage Personal Property  Manage Investments  Loans to Estate  Renounce Fiduciary Positions

Actions That Require Court Approval



Continue Operation of Business



Organize Business Entities



Buy, Sell or Exchange Real Property

Corporate Fiduciaries

 Must Have Office in PA

 Bonding Required With Exemptions for PA Banks and Limited Exemptions for Other Banks

 May Be Appointed Notwithstanding Priorities Granted Others for Complex Estates

 Eliminates Restrictions on Non-PA Banks

 Sanctions for Failure to File Reports and Keep Records

Liability of Guardian of Estate



Liable to Estate for Failure to Exercise

Reasonable Care, Skill & Caution



Not Liable on Contracts Unless

Guardianship Capacity Not Disclosed

Power of Delegation

 Delegation of Duties Authorized

 Liable to Acts of Person Delegated Duties if

Guardian Fails to Exercise Reasonable Care in Selecting, Defining Scope of Responsibility, and Periodically Monitoring Person Exercising

Delegated Duties

Third Party Liability & Immunity

 Liability for Damages for Failing to Comply with Instructions of Guardian

“In Accordance with Terms of Guardianship”

 Immunity for Good Faith Reliance on Guardianship Order

 May Request Copy of Order, Disclosure of Limitations on Authority, and Confirmation Order Remains in Effect

Anticipated 2015 Older Adult Protective

Services Act Amendments

Proposals Anticipated

 Obligation to Report Suspected Financial Abuse May Be Imposed on Financial Institutions in

Addition to Filing SARs

 Obligation to Train Employees Regarding Reporting Requirements Under State Law

Anticipated 2015 Consideration of Uniform

Fiduciary Access to Digital Assets Act

Key Provisions

Personal Representatives, Trustees, Guardians

and Agents Granted Same Access to Digital Assets as Tangible Assets Unless Otherwise Provided

by Will, Trust Agreement, Guardianship Order, or Terms of Power of Attorney Notwithstand

New Uniform Law Commission Projects

Drafting Committees

 2015 Adoption of Trust Decanting Act Anticipated

 2014 First Reading of Divided Trusteeship Act Anticipated