New legislation proposes changes to Pennsylvania Power of Attorney Act
Timothy J. Bupp
Recently a tremor went through Pennsylvania’s Estate Planning Law in the form of several cases dealing with conflict between testate distribution under a Will versus non-probate distribution of a joint account to a surviving party. Distribution of a decedent’s probate assets is controlled by the decedent’s Will; however, distribution of joint assets is controlled by the Multiple Parties Account Act (MPAA) under which a presumption exists that assets in a joint account pass to the surviving party, unless there is clear and convincing evidence of a different intent at the time the account is created.
The recent tremor was caused by several decisions (Novosielski, Piet, Slomski) of the Orphans Court and our Superior Court finding that the testamentary distribution scheme of a Will provided that “clear and convincing evidence” needed to upset the presumption of the MPAA. Under those cases, where a Will distributed assets differently then the subsequent party account designations, the presumption was reversed and the beneficiaries had the obligation to prove the intent of the decedent to leave the joint account to the joint owner as a beneficiary.
The Pennsylvania Supreme Court recently settled these tremors in a case called Novosielski. For many good reasons, the Supreme Court found that a prior Will with a different testamentary scheme does not overturn a multi-party designation. Most practitioners agree that this decision is a good conclusion in that it provides certainty regarding the use of joint party accounts. However, it is of continuing interest to practitioners that the Pennsylvania legislature is in the process of drafting a response to the underlying concern of the Courts related to these cases, which is that an agent under a Power of Attorney can make changes to multi-party designations and thereby alter a principal’s testamentary scheme, becoming in effect the sole beneficiary of the decedent’s estate.
On May 7, 2010, Senate Bill 1358 was introduced into the legislature adopting a recommendation of the Advisory Committee on Decedents’ Estates Laws, recommending fundamental changes to the Pennsylvania Power of Attorney Act. The proposed law would affect changes on all power of attorneys created after the date of enactment, by imposing severe limitations on the freedom of action of agents related to gifting and beneficiary designation changes made in the name of the principal. Under the new Act, any gifting powers entrusted to the agent, including changes in beneficiary designations, creation of survivorship accounts and similar estate planning transactions, cannot be inferred, but must be expressly stated in the language of the document. The new presumption under a power of attorney would be that gifting or beneficiary changes cannot be made by an agent without approval by the local Orphans Court, except in specifically described limited cases, including (a) “limited gifts” as described in the Act; and (b) gifts specifically described by the document, where both donee of the gift and the gifted property or cash amounts were clearly defined. Any other estate planning related changes would be allowed only if approved by the Court after provision of notice to all persons entitled to share in the principal’s estate and hearing and approval by the Court.
The intent of the new Act is to limit the gifting or estate planning changes available to an agent to those few actions which were specifically anticipated by the principal. Where the changes are not specifically enumerated by the power of attorney, they would not be available to the agent without the hearing process and approval of the Court – and even in such a process, it is possible that the Court would not approve and therefore no change would be obtainable. At the point, to accomplish the desired changes the agent would have no choice but to pursue a guardianship proceeding, which effectively replaces the power of attorney and places all future actions of the agent/guardian under the scrutiny of the Court.
Approval of this Act as proposed would present a double-edge sword to the power of attorney process. On one hand, it provides protection for the principal against any overreaching on the part of the agent. On the other hand, it cuts away much of the freedom of action and flexibility which is after-all the purpose of the document in question. CGA will continue to monitor the progress of the proposed legislation and report here on its eventual fate.