The Financial Power of Attorney after Act 95 of 2014

The Pennsylvania Legislature saw a need to protect individuals from the abusive use of powers by Agents under Powers of Attorney. Act 95 of 2014 was the result. Most of the new law took effect at the beginning of this year. If you had a Power of Attorney (POA) drafted after January 1st or want to get a Power of Attorney so that your financial affairs could proceed even if you no longer could handle them, then you must make sure it complies with Act 95’s changes. Generally, an older POA remains valid. However, due to the changes involving various powers, you might be wise to discuss your current and future concerns with an attorney to see if a new Power of Attorney might benefit you. Also, while you could go to the internet to attempt to draft a POA, remember that Act 95 made major revisions to the law, with the added complexities needing review during the drafting process – a do-it-yourself POA found on a website is not exempt from the new requirements but may not include them.

Unlike POAs focused on medical issues, a financial Power of Attorney in Pennsylvania should include the statutory Notice signed by the Principal, for whom the POA exists, and requires an Acknowledgment for all Agents named by the Principal regarding their duties when acting in this capacity. Both forms changed at the beginning of 2015. The Notice has been revised and must include only capital letters. The Acknowledgment experienced a greater overhaul. While the statutory example was altered, the actual wording now can deviate from the example. For example, you could decide your Agent doesn’t have the duty to keep assets separate from yours. Although this usually is not a good decision, Act 95 allows the waiver of this duty by the Principal, which means that it would be deleted from the Acknowledgment. Before the new law, this duty was mandatory and had to be in the Acknowledgment.

Another change with the financial Power of Attorney is what legal requirements exist for its execution. Pennsylvania only required the date and Principal’s signature at the end. No witnesses were needed. Now, you need two witnesses (neither of whom is an Agent in the POA) as well as a Notary’s involvement. Also, none of these three roles can be filled by the same person so, while only the Principal was needed prior to this year, three additional people now are required to have a valid Power of Attorney. This is stricter than what other estate-planning tools, such as a Will, require for execution. It has been suggested that the reason for this is due to the impact on the Principal being greater under the POA (since the person still is alive) than it would be with a Will, which takes effect after death. Regardless of the reason, you have to be aware of this if you want your POA to be recognized in Pennsylvania.

Those are important changes, but the usefulness in estate planning of the Power of Attorney is affected elsewhere in Act 95. Due to sweeping changes introduced by this law, not all can be covered here, but some major ones follow.

“Reasonable expectations” have been added. An Agent should act according to your reasonable expectations “to the extent actually known.” This may seem a bit vague since the Agent has to know your reasonable expectations in any area that you granted the Agent authority to act. To ensure your Agent knows what you expect, you have to include these expectations in the Power of Attorney — they aren’t defined elsewhere, and only you can define your reasonable expectations. Agents also must act loyally for the Principal’s benefit. What if acting loyally works against the benefit of the Principal? The drafting of the POA is important in defining terms and duties for guidance and to avoid “what if” scenarios that could arise under the new law.

Duties of the Agent have been touched upon, but they are tied to powers given in the Power of Attorney. Again, Act 95 has made numerous changes in the law. While the Power of Attorney is a general grant of authority for an Agent to act, eight powers (so-called “hot powers”) must be explicitly listed to be available. These, generally, are concerned with estate-planning issues. They include: creating, amending, revoking, or terminating an inter vivos trust; making a gift; creating or changing survivorship rights; creating or changing a beneficiary designation; delegating authority granted under the Power of Attorney; waiving the Principal’s right to be a beneficiary of a joint and survivor annuity, including a retirement plan’s survivor benefit; exercising fiduciary powers the Principal can delegate; and disclaiming property, including powers of appointment.

There also are 22 statutory “short-form” powers that can be in the Power of Attorney. These are familiar to anyone who has worked with the prior law. To a large extent, they are estate-planning tools. However, two of them involve healthcare issues and probably should be in a separate medical POA since Act 95 focuses on financial issues. Also, the power to make “limited” gifts is noted while the power to make gifts is a hot power. They are different because a limited gift cannot exceed the annual gift-tax exclusion ($14,000 currently) while the other power is not limited. Although short-form powers are not as powerful as hot powers regarding changes they can make, they still have value when it comes to estate planning. Beyond estate planning, the Power of Attorney could handle a related topic: long-term care planning. Knowing the Principal’s objectives is crucial in drafting a document tailored around powers needed to achieve those objectives.

This gives a basic view of various issues that Act 95 has introduced into the drafting of a financial Power of Attorney. Much more can be said and written about this topic. This, ultimately, is the main point. Sweeping changes have been made, and there is no way one POA size can fit all. Before you decide to execute a Power of Attorney, you must know the options and their possible implications. As these implications can be substantial, you should consider consulting an attorney who works in this area of law because what may have seemed simple to do previously is now a complex web of possibilities to explore to find what fits your needs and wishes. Such is the state of the Power of Attorney in Pennsylvania after the advent of Act 95 of 2014.

The Sequential Evaluation – How Disability Determinations are Made

In every disability determination, the Social Security Administration applies what is known as the 5-step sequential evaluation. We will look at this process in the context of a hearing with an Administrative Law Judge (ALJ), but the sequential evaluation is used during each stage that a decision must be made regarding whether or not an individual meets the criteria for being found to be disabled.

The first step in the sequential evaluation involves the issue of Substantial Gainful Activity (SGA), which generally is determined by earnings. If you are working at the time of your hearing and earn more than the monthly SGA level, then you are not currently disabled. There are times when you may be working now but had not worked during most of the period prior to your hearing (which usually is more than 1 year). This could allow you to be found to have a “closed” period of disability that ended when you began to work. As a result, you could receive retroactive disability benefits for the months of the closed period, even though you are ineligible for monthly benefits. However, for any period of disability, the remaining steps of the sequential evaluation have to lead to the determination that you are (or were) disabled.

Assuming that your health prevents you from engaging in substantial gainful activity, the ALJ will move to Step 2 of the sequential evaluation. This focuses on whether you have at least 1 “severe” impairment, which is a health problem that causes some restriction of a work-related activity. You need medical documentation of this impairment. There also is a time element involved – you must have been severely impaired for an entire year. If you have had a severe impairment for less than 12 continuous months, you still can get through Step 2 if your impairment is expected to last for at least one year or to result in death prior to one year. In general, the ALJ will find 1 or more severe impairments, as this is a minimal test in the process. Things become more difficult after this point.

When the sequential evaluation reaches Step 3, attention turns to whether or not you have a listing-level impairment or if your condition, considering all limitations caused by all of your impairments (even those that would not be seen as “severe” when viewed alone), is equivalent to a listing. These listings are found in the Social Security regulations and can be broke into 2 categories, physical and mental. To meet a listing, you must meet certain criteria spelled out in that listing. On occasion, a person might have an impairment (or a combination of impairments) not covered by a particular listing. A listing could be met based on medical equivalence. For example, a recent case found that Listing 11.03 (non-convulsive epilepsy) could be applied to someone suffering from migraines (for which there is no listing). If a listing is met, you are disabled, and you do not have to go through the rest of the sequential evaluation. Most cases are not decided at this point, though.

The next step is not actually one of the 5 steps in the sequential evaluation. Before the ALJ looks at the fourth step of the process, the ALJ has to decide your residual functional capacity (RFC), which looks at the work-related abilities that you retain despite your impairments. Depending on your impairments, you could have a physical RFC and a mental RFC. However, if your impairments are only exertional (which means that they are related to strength), there are medical-vocational grids that the ALJ can use to determine if there are any jobs that you can do. When both exertional and non-exertional impairments (such as depression) are present, these grids can be used as a framework for deciding your case but cannot dictate the disability determination as they can when you only have exertional impairments. When the grids can‘t be used to decide the case, the ALJ needs the help of a person who is called a “vocational expert” to finish the sequential evaluation.

The ALJ’s determination of your RFC becomes crucial at Step 4 of the sequential evaluation that looks at your Past Relevant Work (PRW). At this stage, the vocational expert is asked whether you could do any of your prior jobs (which generally are jobs that you performed at SGA level for more than a few months during the past 15 years of your work history) based on your current RFC. If you are found to be able to do so, then you are not disabled. If you can’t do any of your PRW, then your claim reaches the final “official” step.

At Step 5 of the sequential evaluation, the ALJ asks the vocational expert questions about a hypothetical worker. These are based on your RFC. Generally, an ALJ may present 2 or 3 hypotheticals to the vocational expert, who is supposed to know if there are any jobs in the national economy that exist in “significant numbers” that you could do on a full-time basis, basically. One of the hypothetical workers represents the ALJ’s view of you, although you are not told which is supposedly you. However, if the vocational expert can find no jobs for that hypothetical person, then you are disabled

Although you may be disabled at what would appear to be the end of the sequential evaluation, there is a last test that you must pass. This involves alcohol or other drugs. If a person is using any of these, the ALJ will decide if this usage is a “substantial and material contributing factor” to your being disabled. In other words, would you still be disabled if you stopped using alcohol or other drugs? If this would not affect your ability to perform SGA, the decision that you are disabled would be the final decision in your case.

Focus on the Continuing Disability Review

When you are found to be disabled, you should expect to face continuing disability reviews in the future. After any disability determination, a date known as a diary will be scheduled for a review. Generally, they are supposed to be three or seven years after the most recent disability finding. Some disabling impairments, such as many mental illnesses, are considered more likely to improve so a three-year review may be set. Others – like low intellectual functioning – generally remain throughout one’s life, but the law requires reviews so they probably would be set for review seven years after the most recent disability determination. The likelihood of improvement is the key so a condition initially found disabling but viewed as one that probably won’t last beyond than the one-year requirement in the Social Security Administration’s disability definition may be revisited within a year of the current decision.

At times, insufficient funding has made review less likely than the law dictates. Recently, Congress increased funding for continuing disability reviews so people who have escaped review in the past should be aware that they might be not so lucky in the near future.

A continuing disability review (CDR) will focus on your medical condition instead of your financial situation. There are various factors considered in this decision regarding whether or not your condition continues to prevent you from working enough to remain disabled under the agency’s rules and regulations. The basic issue is if there has been any medical improvement in your impairment(s) that led to you being found disabled. If there has been improvement, the next issue is if the medical improvement has affected your ability to work. However, even when there has been no medical improvement, there is another factor: do any exceptions to medical improvement (which will be discussed briefly later) apply? If there is no medical improvement applicable exception, you remain disabled.

What happens if the continuing disability review shows that you have medically improved – and the improvement is related to your ability to work – or an exception to medical improvement applies? You may lose your disability benefits. In general, this only occurs if the SSA finds that you can do substantial gainful activity (which is basically working 8 hours a day for 5 days each week). Also, even when your condition has improved, you still may be disabled because the SSA then has to decide if your condition meets its current disability rules. In the end, most people actually keep receiving benefits after a CDR.

The definition of “medical improvement” in a continuing disability review is any decrease in the medical severity of your impairment(s) that were present during the most recent determination that found you disabled, often referred to as the “most recent comparison point.” If you have not been reviewed after your initial disability determination, that initial decision is the comparison point regarding any improvement. However, if you had a CDR after the first decision, your condition at the prior continuing disability review is now the comparison point. Medical improvement could be found based on improvements in your symptoms (which you report), signs (as observed by medical professionals), and/or laboratory findings associated with your impairment(s).

Medical improvement alone doesn’t mean that your disability has ended. Improvement must be related to your ability to work. If the impairments that led to the finding of disability at the most recent comparison point now are less severe, your improved condition won’t not affect your disability status if your functional capacity to perform basic work activities hasn’t increased.

Even if your functional abilities have increased, you must be able to perform substantial gainful activity defined by the SSA in the year of the continuing disability review to end your disability benefits. Unless your capacity to work improves to this extent or one of the exceptions (which will be mentioned later) applies to you, your benefits will continue. What is “functional capacity to do basic work activities?”

Disability looks at the inability to do any substantial gainful activity due to any medically determinable physical or mental impairment. “Basic work activities” are abilities and aptitudes required by most jobs. They include exertional abilities, such as walking, standing, pushing, pulling, reaching, and carrying. Nonexertional abilities and aptitudes include seeing, hearing, speaking, remembering, using judgment, handling changes, and dealing with supervisors and coworkers. A person with no impairments can do all of these, basically, and has an unlimited functional capacity for basic work activities.

Disabling impairments result in some limitation to the functional capacity for at least one of these basic work activities. Residual functional capacity (RFC) is what you can do despite limitations caused by an impairment. If you can’t perform substantial gainful activity based on your RFC, you are disabled. Your RFC is used to determine whether you can do your past work or, considering your age, education, and work experience, other work at the level of substantial gainful activity.

In a continuing disability review, the Administration must determine if any medical improvement is related to your ability to work when there is a decrease in medical severity shown by symptoms, signs, and laboratory findings. The SSA assesses your residual functional capacity based on the current severity of the impairment(s) present at your last favorable medical decision.

The new residual functional capacity is compared to your residual functional capacity during your prior disability decision. An increase in your residual functional capacity is based on actual changes in the signs, symptoms, or laboratory findings – otherwise, any medical improvement isn’t considered related to your ability to do work.

There are additional factors and considerations that can be part of the continuing disability review. Generally, the most important of these are any exceptions to medical improvement. There are two groups of exceptions to medical improvement reviewed at a continuing disability review. The first focuses on current impairments and the ability to do substantial gainful activity. The Administration looks at evidence that you no longer are disabled – or, perhaps, never should have been considered disabled. There must be substantial evidence of any of these.

One exception arises if you benefited from advances in medical or vocational therapy or technology related to your ability to work. There also may be new or improved diagnostic or evaluative techniques showing your impairment is not as disabling as it was found to be during your most recent favorable decision. A third exception involves substantial evidence showing a prior disability decision was in error, although this only can be found when conditions for reopening a prior decision are met.

The second category of exceptions to medical improvement not involving medical improvement or substantial gainful activity also can lead to an end of your benefits at a continuing disability review. One involves a prior determination or decision was fraudulently obtained. The Administration looks at physical, mental, educational, or language limitations that you had at the prior determination. Another exception concerns not cooperating with the SSA. If asked for medical or other evidence or told to go to a medical examination, you will be found no longer disabled if you ignore such “requests,” provided you lack good cause for the failure. The third exception in this group seems obvious: if the SSA cannot find you and has questions regarding your disability, your payments will be suspended. Finally, your failure to follow prescribed treatment which would be expected to restore your ability to engage in substantial gainful activity, unless you show good cause for this, will end your entitlement to benefits.

If you are notified your Social Security disability benefits are to be ceased after an unfavorable continuing disability review, your benefits will continue for two more months to allow you time to arrange other support. (You also may be able to contest the decision.) The only exception to the two-month rule is if your benefits are ending for failure to cooperate – in that case, they would cease immediately.

Medicaid Estate Recovery – Questions

I looked at the basics of Medicaid Estate Recovery in Pennsylvania previously in the first part of this series, but there are other matters that may come into play and should be kept in mind whenever the possibility of estate recovery exists. One involves an objective of estate planning (namely, to transfer wealth to those of one’s own choosing), which estate recovery can hinder. Another issue concerns the need to protect a claim subject to estate recovery, including who can be held responsible for not doing so. A third topic of potential interest is the ability of the Department of Public Welfare (DPW) to postpone or waive its claim and the implications of these paths.

When someone may become subject to Medicaid Estate Recovery, how does this impact estate planning?

For anyone who was at least 55 years old and was on Medical Assistance (as Medicaid is called in Pennsylvania) after August 15, 1994, estate recovery is possible if the individual received nursing facility services, home and community based services, and related hospital and prescription drug services, as was noted in the previous post. This means that any estate planning must be handled prior to that point in time in order to avoid possible Medicaid Estate Recovery.

You need to focus on assets that DPW targets – in general, these are assets that are part of the “probate estate.” If something does not have to go through the process of estate administration in order for a beneficiary to become the new owner, then it should be free from estate recovery. A life insurance policy that names a beneficiary is an example. For a house to avoid estate administration and also to avoid estate recovery, you must plan carefully. If you are over 55 and receiving Medical Assistance (MA), you have options as long as you do not receive it for the three types of services mentioned above. You would need a deed that makes the property jointly owned by you and your beneficiary with rights of survivorship or that transfers the property entirely to the other individual.

(As an aside, if you would die within one year of this transfer, the entire value of the house would be subject to inheritance tax. In fact, if you transfer things that you own to an individual that have a total value exceeding $3000 during the year of your death, then Pennsylvania’s inheritance tax will apply.)

If probate property that is subject to Medicaid Estate Recovery is transferred, can anyone be held liable and forced to pay DPW’s claim?

The decedent’s personal representative – the estate’s executor or administrator (when there is no Will) — has a duty to make sure that DPW’s claim is paid after creditors whose claims have higher priority have been paid. Therefore, the personal representative will be personally liable for DPW’s claim when property subject to that claim is transferred without valuable and adequate consideration to an heir or anyone else with a claim of lower priority if DPW has not been paid when the transfer occurs. “Valuable and adequate consideration” is defined by DPW as a sale of property at fair market value by the estate’s personal representative to a party who is unrelated to the decedent or the personal representative. If this amount is obtained, then the personal representative would not be liable for payment of DPW’s claim.

As will be discussed briefly, DPW may postpone its claim under certain circumstances. However, the personal representative remains liable for transfers during this period. The personal representative must take steps to protect DPW’s claim. This may require a mortgage or other recorded encumbrance to be placed against real property in the decedent’s estate on behalf of DPW. There also are provisions for perfected security interests to be placed against items of personal property worth more than $10,000 as well as cash (or cash equivalents such as securities) to have a total value exceeding $50,000 to be placed in trust, with DPW receiving the remainder at the trust’s termination up to the amount of its claim.

In addition, a person who receives property subject to a Medicaid Estate Recovery claim by DPW will be liable if the property’s fair market value was not paid for it. The transferee’s liability is the difference between the property’s fair market value and the amount of money received by the estate for the property. This person also must protect DPW’s claim during a period of postponement so that it is paid when the period ends.

When will a claim under the Medicaid Estate Recovery Program be postponed or waived?

Postponements can be requested under certain circumstances. For example, DPW will wait to collect its claim against a decedent’s home when any of the following reside there: a surviving spouse; a child who is “totally and permanently disabled” (as defined by the Supplemental Security Income (SSI) program); a surviving child is under the age of 21; or a sibling who has lived in the home at least one year before the death of the MA recipient and who also owns an equity interest in the property. When the last of these individuals has died, transferred the property, or left it, the postponement period ends, and the Medicaid Estate Recovery claim must be paid.

Undue hardship waivers are more complex so what follows is not an all-encompassing review. However, the most important difference between these and postponements is that a waiver means that DPW has relinquished its right to collect its claim against the estate forever.

The most common type of waiver probably involves a person who meets certain criteria relating to the primary residence of the decedent. First, the person must have continuously resided in the home for at least 2 years immediately before the decedent started to receive nursing facility services or for at least 2 years during which MA-funded home and community based services were received. Also, the person cannot have an alternative permanent residence. The third requirement is that the person provided care or support to the decedent for at least 2 years while MA-funded home and community based services were received by the decedent or for at least 2 years before the decedent received nursing home services and while the decedent needed care or support to remain at home for those two years.

Other sources of waivers involve income-producing assets that were the primary source of household income, without which gross family income would be less than 250% of the Federal poverty guideline — family farms and businesses are examples; payment of necessary and reasonable expenses to maintain the home while the decedent was receiving home and community based services or while the home was vacant when the decedent was in a nursing facility; and the administered estate of the decedent had a gross value not greater than $2,400 and  there is an heir.


Medicaid Estate Recovery is a complex area of law, and answers to these questions only touch its surface. For all of the needed details, you should contact an attorney familiar with this subject to protect the interests of all concerned.

Medicaid Estate Recovery in Pennsylvania

In 1993, the federal government enacted a law requiring states to create estate recovery programs for repayment of long-term care costs covered by Medicaid (which also is known as Medical Assistance in Pennsylvania). How to do this was left to each state to decide, for the most part. As people are living longer, they often live their final days in nursing homes. Pennsylvania’s Medicaid Estate Recovery Program places an emphasis on recouping costs for nursing-home care, as well as home and community-based services that can be covered by Medicaid under a waiver authorized through the Social Security Act because these are provided to avoid having to place a person in an institution such as a nursing home. The third focus of estate recovery involves Medicaid payments for related hospital and prescription drug services that accompany the two other categories of services. The Medicaid Estate Recovery Program can be a major concern during the administration of an estate and could be an important consideration in estate-planning decisions, too.

Medicaid estate recovery targets estates of deceased individuals who received the services previously mentioned after they turned 55 and needed assistance from Medicaid to pay the bills. Pennsylvania generally requires repayment from these estates so the decedent’s personal representative (commonly known as the executor when there is a Will or the administrator when the decedent died without a Will) must be aware of this possibility.

The key here is whether or not the decedent was on Medicaid during the last five years of her or his life. If you are the personal representative and you know this was the case, then you must send a letter containing with specific information that the Department of Public Welfare (DPW) requires. Then, in general, DPW has 45 days to send you a Notice of Claim. Depending on the circumstances, the agency is not confined to making a claim regarding only the prior five years. If Medicaid paid for nursing-home services before this period, then DPW’s claim could go further back.

In addition, when you are the personal representative, you have to look at the 5-year period. You would have an ethical obligation to notify DPW if you are aware of Medicaid payments that actually occurred for the targeted services more than five years ago, as long as the individual was 55 or older period that period of time.

After DPW provide notice of its claim, you could appeal this at an administrative hearing. If the Department’s claim survives, then the recovery phase begins. It can make its claim against all property (both real and personal) that could be administered by a personal representative, even if the personal representative decides not to administer some of the estate’s property. So, if you are the personal representative, you cannot shield property that is in the estate by ignoring it.

On the other hand, most property that does not have to go through the estate process cannot be claimed by DPW. This would include property owned jointly with survivorship rights (or owned by spouses through a tenancy by the entireties). Life insurance that is paid directly to a named beneficiary also avoids the DPW claim, but the same policy – when payable to the estate – can be recovered. Assets in a testamentary trust, which is created by a Will, are subject to DPW’s claim; assets in a trust created by the decedent prior to the individual’s death escape the recovery program as long as they are not payable to the estate. This can be important to remember when an estate plan is being drafted.

Another point that you should remember if you are in charge of the estate is that DPW has a claim to estate property but does not have a lien against it through the Medicaid Estate Recovery Program. Anyone with a lien on property has priority versus DPW’s claim, which, unlike a lien, is unsecured. Among claims to payment from the estate, DPW’s claim only is in the third category, and that is limited to Medicaid payments made during the person’s last six months. Any other claims by DPW are relegated to the sixth payment class.

We have gone through some of the basics concerning Medicaid estate recovery. There are others that bear mentioning whether you are the personal representative in charge of administering an estate or you are a person setting up an estate plan that you want to provide as much to your chosen beneficiaries and as little to the government as possible. These factors raise such issues as the duty to protect DPW’s claim when the transfer of estate property is involved, the timing of transfers prior to going to a nursing home as well as prior to death, and the possibility of postponing or even waiving claims under Medicaid estate recovery when you would be an heir. I will touch on these topics next time. You should keep in mind that this can be a complex area of law so you probably should discuss them in more depth with an attorney if any of these subjects applies to a situation in which you are involved.


Credit Card Debt & the Statute of Limitations

When a person owes credit card debts, but the amount to be paid has grown to a level that the person realistically cannot repay, the individual may experience overwhelming anxiety about what a creditor or debt collector might do. If you are in this situation, you cannot let anxiety keep you from looking at possible options. For example, with debt collectors purchasing older debts for pennies on the dollar, you have to view the possibilities with the credit card debt’s age in mind because you might be inclined to file for bankruptcy when the defense provided by the statute of limitations could be a better solution under the circumstances.

A statute of limitations exists for most civil and criminal matters in order to provide finality and to ensure that this will occur when evidence remains reasonably fresh. In Pennsylvania, credit card debt generally stems from an open-end, or revolving, account based on a written contract. This places the statute of limitations for such debt at 4 years. This means that, if you have not used a credit card during the last 4 years, you could use the limitations period as a perfect defense against an attempt by a creditor or debt collector to obtain and enforce a judgment against you.

You have to be careful, however. If you discuss the debt with a debt collector, for example, you must avoid reaffirming that you owe the debt, entering into a new payment arrangement, or – especially – making a payment on the credit card debt because you do not want to act in a way that actually starts the statute of limitations over again. The defense cannot protect you for at least another 4 years.

For this reason, you want to avoid talking with anyone attempting to collect an old debt. You do not want to do anything that would be seen as an acknowledgment by you that you owe the debt. You always should bear in mind that you do not have to speak with a creditor or debt collector, which is the safest course of action to take.

You could have an attorney speak or write on your behalf not to make a deal but to deal with the issue of the statute of limitations. A letter also can be written which communicates that you are not to be contacted and that doing so could result in a penalty being paid by a debt collector to you under the Federal Fair Debt Collection Practices Act. Pennsylvania has a similar law – the Fair Credit Extension Uniformity Act – that applies to creditors as well. It describes unfair and deceptive debt collection practices and sets forth the penalties that can be enforced against those engaging in these practices.

These and other laws provide some protection against harassment by creditors and debt collectors. However, even after the statute of limitations has run out your credit card debt, the debt still exists. You may find yourself receiving notice of a lawsuit to obtain a judgment for this debt. This is when you need to know what to do – after you have been served with the required notice, you probably should consult with an attorney to make sure that you are protected and, possibly, to pursue a claim for damages under the various laws that apply.

When this situation occurs, you no longer are safe if you do nothing. Because you owe the credit card debt, you will face a default judgment if you do not answer the other party’s complaint. You could lose things that you own when such a judgment is enforced. Also, judgments have a 5-year statute of limitations but can be revived before this period ends, potentially resulting in a long string of 5-year periods when you may face enforcement of the judgment.

However, instead of doing nothing, you need to have an answer to the complaint filed on your behalf in which the statute of limitations that applies to credit card debt is raised as a defense. As long as it applies and is raised in a timely manner after you receive the complaint, you have a perfect defense against the creditor or debt collector because, although the credit card debt exists, the other side waited too long to enforce the right to a judgment for that debt. This is the power of the statute of limitations.

I had mentioned bankruptcy earlier. Your factual circumstances will dictate whether or not it should be considered. When faced only with an unsecured debt, such as most credit card debts, that can be defended by the appropriate statute of limitations, you probably would want to delay taking the more drastic action of filing for bankruptcy. You do not want to file now because you have a perfect defense against the creditor or debt collector at this time. Also, you may need to pursue a bankruptcy in the future but could be prevented from doing so if you file when you would not gain more relief through bankruptcy.

In addition, you need to consider the statute of limitations regarding credit reports. The credit card debt can be reported for 7 years, even though it technically can be collected only for 4 years. Even so, a bankruptcy can remain on your credit reports for ten years after you file. This means that you should be able to clean up your credit reports sooner in this scenario by relying on the 4-year statute of limitations applicable to your credit card debt.

Of course, this is a brief look at some options that you have in handling your debts. Different situations will point to different courses of action. The defense provided by the statute of limitations may be the best solution when people attempt to collect credit card debt from you. To review and understand what you can do, you should contact an attorney when problems with debt need to be resolved.

When is a Power of Attorney in Effect?(Pt 2)

In the previous post, I took a brief look at various powers of attorney found in Pennsylvania’s laws and discussed how and when they take effect. However, the issue of timing regarding when a financial power of attorney can be used often is something that the principal who would be giving the power wants to address in the document due to concerns such as loss of control and possible abuse. The topic of timing in combination with varied reasons for having a financial power of attorney is the subject of the second part of this discussion of powers of attorney in Pennsylvania.

As your power of attorney is being drafted, you and the attorney should discuss its focus or purpose as well as how to use specific powers to achieve this. There are situations that can be handled by a more limited power of attorney. This limitation may mean that it only can be used by your agent for specific periods of time. If not specified, Pennsylvania law presumes that a power of attorney is durable, however.

The term “durable” means that it is in effect and, technically, could be used by your agent from the moment when it is executed (or, to put it more simply, when it is signed). People often feel that this means that they are giving away the authority to handle financial matters, even though they are capable of doing so, and worry about the power being abused. This, in turn, can spark interest in limiting when the document will be effective. Such restrictions could make sense, depending on the purpose for this document.

A non-durable power of attorney can be used by your agent only when you are not incapacitated. This generally is when you least need to have one. As an instrument of estate planning, this would have little use because you would not need someone handling financial affairs to carry out the objectives of your estate plan while you are capable of doing so.

However, a non-durable power of attorney can be useful to give someone the authority to handle a transaction when you are not able to be present for some reason. The non-durability combined with the limited scope (for example, the authorization for an agent to complete the sale of a vehicle) can make this useful because, in the example, you can sell the vehicle even though you cannot be present and the document only exists until the specific transaction is accomplished.

In other scenarios, a durable power of attorney makes more sense. You might not like the sound of giving your agent the power to handle your banking transactions or to sell your real property (which might mean the house in which you are living). However, if you are handling your affairs, it would not be that easy for someone to take over. If the agent would try to do this, you can put an end to the attempt by revoking the power of attorney, which is easy to do. An agent who misuses this power can be subject to civil and criminal penalties, and you are likely to know if your agent is making such attempts.

For example, to sell your house, the agent would have to record the original of the document in the appropriate office in the county in which the property is located and would have to show the property to prospective buyers. Meanwhile, monthly statements from your financial institution would reveal any problems involving transactions that you did not authorize.

Also, your choice of the agent should reduce the likelihood of abuse of power – you need to trust the person you name as your agent. While this is no guarantee, you should not name someone as your agent if you have doubts about his or her trustworthiness. Instead, this would be a situation in which you might want to wait to get a power of attorney.

Some people prefer to have a “springing” power of attorney, which springs into effect when a specified event occurs. Often, the event involves the person becoming disabled or incapacitated because this is when someone would be needed to handle financial and other affairs. The potential for problems exists because you need a well-defined point at which the power of attorney springs into effect.

Disability and incapacity should be determined by medical professionals. There may not be a doctor available when this occurs so there could be a lag in time before someone can act as your agent. There also could be difficulty in getting a doctor to sign an affidavit acknowledging your condition. Then, if you no longer are disabled or incapacitated, you should get another affidavit stating this and making the springing power ineffective again.

In the end, a durable power of attorney usually is the best choice. The power is least likely to be abused when you can handle your own affairs, and you can easily revoke it during this time. Periods of disability or incapacity are when the power of attorney has the greatest potential for abuse, but the likelihood is limited when you take the time to choose someone you trust to be your agent. Finally, a financial power of attorney must have an acknowledgment signed by your agent detailing the responsibilities of an agent and noting the consequences of ignoring them, which helps to reduce any temptation that might exist.

When Is a Power of Attorney in Effect?(Pt 1)

A Power of Attorney can be useful for numerous reasons. For instance, the importance of a financial power of attorney often is seen in estate planning but can come into play for other purposes as well. For this reason, it is the prime focus here due to the potential impact of its use, which makes many people reluctant to make this power durable (which will be defined below). Of course, there are reasons beyond financial matters for needing a power of attorney. Pennsylvania has statutes that encompass other types of powers of attorney and that address when these powers are in effect.

For example, under Pennsylvania law, a “mental-health power of attorney” gives you the opportunity to choose someone (known as your “agent”) to make a wide range of treatment decision if you are experiencing a mental-health crisis. However, the same law also limits the lifespan of this document to two years from the date that you sign it into effect (unless you revoke it sooner or it is in effect when the two-year mark is reached). Within this time period, this power of attorney can be used by your agent when an attending physician determines that you are not capable of making decisions regarding mental-health treatment. When the attending physician decides that you can make these decisions once again, then your agent ceases to have authority.

A “health care power of attorney” is more common and often is combined with the financial power of attorney in an estate plan. Pennsylvania has a set of laws focusing solely on this legal tool and defining when it is legally relevant. A health care power of attorney is valid until you revoke it, unless you have specified a time when this document no longer is valid. It should be noted that, while it may be valid, this does not mean that it can be used by your agent named in the power of attorney at all times. Instead, it only becomes effective when the attending physician finds that you lack capacity to make these decisions and ceases to have power when the attending doctor finds that you are able to make health care decisions again.

Meanwhile, powers of attorney that deal with financial matters tend to have more variations and need to be drafted carefully to meet your objectives, leading to careful consideration of how and when they can be used. In the list of statutory powers regarding a power of attorney, you currently will find 22 powers, of which 19 are financial in nature. These range from transactions involving tangible personal property to investments in stocks, bonds, and other securities to disclaiming of an inheritance.

The potential scope and consequences of these powers can cause a principal, who is the person giving authority to her or his agent, to be hesitant to want a power of attorney in the first place. This is when you need to look at the flexibility of this document to see if one can be drafted to meet your needs and protect your peace of mind.  In the next post, a closer look at financial powers of attorney and when you might want them to be in effect for your agent’s potential use will be undertaken.

Habitability & Residential Leases, Pt 2

Now that we will looked at what the implied warranty of habitability is in residential leases, we should look at your options for enforcement of this right. Court cases have stressed that the landlord must be aware of the circumstances before you take action to solve the problem. Because the stakes are so important (having a place to live and living in a place that is safe, sanitary, and healthy), you should provide notice to the landlord in writing. You need to describe the problem, request that the landlord fixes it, and state what you will do if the repair isn’t made. In your notice, you need to give the landlord a reasonable amount of time to make the repair.

Although a “reasonable amount of time” is hard to define, the deadline depends on how urgent the repair is. For example, a lack of heat in the middle of winter probably needs to be handled sooner than an infestation of cockroaches that’s limited to one room since bitter cold generally would be a bigger threat to health. You also need to keep a copy of the writing that you give to the landlord, and you should consider sending the letter to the landlord by certified mail, return receipt requested, in an attempt to get additional proof that you provided notice.

If the landlord lets a reasonable deadline pass without making a repair that involves habitability of your rental unit, then you can take the action that you stated in the writing to the landlord. As for what you might consider, there are some common options. ”Repair and deduct” often is a good choice. Find someone who is qualified make the necessary repair and pay for the reasonable cost of this work. Then, when you pay your rent, you deduct this cost from the rent and include documentation of the cost of the repair with this payment — provide the landlord with a copy and keep the original bill.

You might try for a court order requiring the landlord to make the repair, or you might decide to sue the landlord for rent that you paid for uninhabitable portion of your unit after the landlord knew of the breach of the warranty of habitability. Violations of the housing code that a county inspector found serious enough could give you the option of being protected by the Rent Withholding Act, but the remedies from the breach of the implied warranty usually are more comprehensive, making them more helpful.

Two final options merit mention. If a place is completely uninhabitable, then you could give notice to the landlord and move. This is risky because the landlord may sue you for breaking your lease. As mentioned before, this is why you need evidence that you should begin collecting when you have reason to believe at least some of the rental unit is uninhabitable for safety or health reasons. Photos and witnesses can help you make your case. Copies of all correspondence with the landlord about the problem should be saved as well. Proof that the landlord did not make the necessary repairs within a reasonable time also is important.

In addition, having estimates from a professional regarding the cost of the repairs can be useful as well. If you have to go to a hearing, you should ask whether the person who gave the estimate is willing to attend. She or he may not come for any number of reasons, but there is no harm in asking.

The last option to be discussed here is similar to the Rent Withholding Act’s escrow account for certain housing code violations but is a more flexible remedy for most tenants: rent abatement, in which at least a portion of the rent is placed into a separate financial account until the situation is resolved. You could attempt to estimate the portion of your residence that was not habitable and put this part of the monthly rent into the account while you take action to get the problem cleared up. You could place all rent into the account – if you do, do not touch these funds until the inevitable lawsuit is finished since you may have to pay at least some of this money to the landlord depending on the case’s outcome.

Just remember that the implied warranty of habitability always protects you in a residential lease situation, no matter what the landlord says or tries to do. Use it when you have a good reason to do so but also remember that it only applies to serious problems and not, for example, to a faucet that leaks a little. When it does apply, it can be a powerful tool providing powerful options against a bad landlord. However, you should be careful that a court is likely to see a habitability issue before you do anything. For this reason, you should consider consulting with an attorney before you act.

Habitability & Residential Leases, Pt 1

In Pennsylvania, whenever you rent a residence – whether it is an apartment, a house, or even a mobile home – you are protected by an implied warranty of habitability. The lease can be in writing or it can be a verbal agreement – the warranty will exist. Furthermore, your landlord cannot get you to waive this right in a residential lease because it automatically exists even if it is not expressed in the lease or a landlord expressly attempts to get rid of it. It protects you, as the tenant, from being forced to live in a place that is not safe, sanitary, and healthy. This is a powerful weapon against so-called slumlords, but, like all weapons, you must understand its purpose and how to use it for it to be useful.

The implied warranty of habitability was established by the Pennsylvania Supreme Court in the case of Pugh v. Hughes in 1978, and it is through court decisions that its meaning has developed. The basic idea is that a lease is a contract, which provides obligations for landlords and tenants. A tenant is supposed to pay rent, and this action requires the landlord to provide a safe and healthy place in which the tenant lives. If either party to the lease fails to live up to her or his obligation, then the other party cannot be forced to do what would be required here – these are considered to be mutual obligations because the failure of one to live up to the responsibility relieves the other of his or her obligation.

The idea sounds straightforward but becomes more complicated as you look at the details that come along with it. Tenants who do not pay their rent face eviction. Landlords who do not make repairs do not necessarily breach their obligation to provide a habitable residence for their tenants. Habitability goes to the ability to live in a place without some type of danger to the welfare of tenants due to the condition, which was under the landlord’s control. In other words, if you caused the problem that made the condition of your residence (or some part of it) a danger to safety or health, then you cannot blame the landlord for breaching the implied warranty.

Habitability refers to livability. Examples of conditions that can prevent a place from being livable include a lack of running water, the absence of heat in the winter, the presence of rats or cockroaches, and a leak in your ceiling. However, you must keep in mind that habitability is not an all-or-nothing thing. A ceiling leak that leaves the bedroom unusable does not necessarily make the rest of an apartment or house unlivable. As we will see later, this is a factor that can affect your options when you deal with the landlord and, potentially, with the legal system.

If at least part of your residence cannot be used due to the landlord’s lack of upkeep while you have remained current with your rent payments, you are in position to move forward with enforcing the implied warranty. At the same time, you must be sure not to move to soon in implementing one of the options that a breach of the warranty would provide – there are steps to take in order to protect yourself from an action by the landlord, such as eviction, while you act to protect your rights.

When you decide that the place that you rent has some area that is not habitable due to conditions like the examples listed earlier and that the landlord is at fault, you need to do what you can to protect yourself from the landlord blaming you. You want to have evidence that the problem exists, which becomes particularly important if you end up in the legal system by your choice or your landlord’s choice. Evidence can be in the form of photos, for example. Having witnesses who would be willing to describe what they have seen also can be beneficial. You could have an inspector from the county check for housing code violations. Whether or not you take actions like these before the next step really is up to you, but you definitely would work on these and other actions if you are headed toward the legal system. The step that you must take before you pursue any options is notifying the landlord so we will look at this prior to considering your remedies and other matters in the second part of this post.