October 30, 2014 PA Regulatory & Legislative Update Raymond Pepe Copyright 2014 by K&L Gates LLP. All rights reserved.
Act 95 of 2014: Power of Attorney Amendments
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 Not Applicable to Commercial Powers of Attorney, Except for Notarization Requirements
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. klgates.com 4
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.] klgates.com 5
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 klgates.com 6
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 klgates.com 7
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 klgates.com 8
Actual Knowledge Based on Knowledge of Employee Conducting Transaction Unless Employee Acts With Conscious Disregard or Willful Ignorance of the Existence of Facts klgates.com 9
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 klgates.com 10
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 klgates.com 11
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 klgates.com 12
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 klgates.com 13
Act 52 of 2013: Estate & Trust Tax Amendments Effective 1/1/14 klgates.com 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 Trustee Liable for Failure to Keep Records of Beneficiaries Names, Addresses & Tax IDs
McNeil v. Commonwealth klgates.com 16
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 Trust Did Not Generate PA Source Income
Uniform Adult Guardianship and Protective Proceedings Jurisdiction Act klgates.com 18
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 Any State As Needed to Address Emergency
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 klgates.com 20
2015 Power Of Attorney Amendments Needed To Correct Errors in Act 95 klgates.com 21
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 Include All Powers Issued By Business Entities As Authorized by Applicable Entity Law
Other Anticipated 2015 Power of Attorney Amendments klgates.com 23
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 Supreme Court Elder Abuse Task Force Report
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 klgates.com 25
Uniform Act Provisions Standing Remedies for Breach of Agent s Duties Exoneration of Agents General Powers of Agents Statutory Form Power Acceptance of Power by Agent Effectiveness of Power Upon Incapacity Termination of Power Reimbursement and Compensation of Agents klgates.com 26
DEAC Recommendations Disposition of Unclaimed Real Estate Powers of Appointment Minor Trust Code Amendments Recodify Charitable Instruments Law klgates.com 27
2015 Amendments to Guardianship Law klgates.com 28
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 Manage Real Property
Actions That Require Court Approval Continue Operation of Business Organize Business Entities Buy, Sell or Exchange Real Property klgates.com 30
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 klgates.com 31
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 klgates.com 32
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 klgates.com 33
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 klgates.com 34
Anticipated 2015 Older Adult Protective Services Act Amendments klgates.com 35
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 Authorization to Refuse to Conduct Transactions
Anticipated 2015 Consideration of Uniform Fiduciary Access to Digital Assets Act klgates.com 37
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 Click-Through-Agreement Restrictions
New Uniform Law Commission Projects klgates.com 39
Drafting Committees 2015 Adoption of Trust Decanting Act Anticipated 2014 First Reading of Divided Trusteeship Act Anticipated 2014 Formation of Committee to Revise Uniform Guardianship and Protective Proceedings Act
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