Changes to the Power of Attorney in New York State
On December 15, 2020, Governor Cuomo enacted a law which made sweeping changes to the Power of Attorney Statute in New York State. The law will be effective 180 days after signing (approximately June 2021), and changes the Power of Attorney statute for purposes of financial management and estate planning. A summary of the changes to the Power of Attorney are as follows:
Simplified Form And Elimination of Separate Gifts Rider
Under the old regime, the Statutory Power of Attorney was composed of two parts – the “Power of Attorney New York Statutory Short Form” and the “Power of Attorney Statutory Gifts Rider.” The purpose of previously separating the duties of the agent from the gifts section was to avoid fraud and abuse. This goal was not immediately accomplished and instead, principals executing the Power of Attorney found the two forms complex and cumbersome.
One of the changes to the Power of Attorney is the elimination of the separate Statutory Gifts Rider. Now all of the powers, including duties, financial management, and forms, will be under one form.
Changes to Power of Attorney Include Important Technical Amendments
Allows a Person to Sign at the Direction of a Principal
Previously, if you were physically disabled and could not pick up or hold a pen to sign the document, you were not able to have a Power of Attorney executed on your behalf. Instead, you likely had to go through Article 81 Guardianship. This is not an ideal result as Guardianship tends to be more expensive and sometimes overly burdensome, especially for individuals who were cognitively intact, but physically infirm. (This was also a strange result because an individual could have a Last Will and Testament, which disposes of all of their assets, signed at their direction, but not the Power of Attorney).
One of the important changes to the Power of Attorney statute is that the principal is now able to direct a third party, other than the agent or successor agent, to sign on his or her behalf and in the principal’s presence. If you are recovering from a medical event, such as a stroke, where you have cognitively made the recovery but have been paralyzed as a result, you can direct somebody to sign the form on your behalf.
Expands an Agent’s Power to Gift up to $5,000 without any Modification
Under the old regime, the agent could only gift $500 per year without an accompanying gift rider. This cap severely limited the agent’s ability to make transfers of assets when necessary, for example, to engage in Medicaid Planning, or Estate and Tax Planning.
Under the new rules, the cap is now $5,000 per calendar year, and permits the removal of the cap by adding an optional gift clause and eliminates the need to sign and notarize an additional document.
Authorizes Delegation of Duties to One Agent
Under the old regime, there was an option to appoint multiple agents and to have those agents act separately. Many times, the principal would sign the form appointing two agents but would forget to initial the box which would allow the agents to act separately. This would pose problems with the bank. Alternatively, there may have been circumstances where the agents were intentionally supposed to work together but the bank would require the fiduciary to sign a document that authorized the agents to act separately.
One of the technical changes to the Power of Attorney statute is that now one agent can delegate certain banking provisions to the other agent even in instances where the an option to appoint agents
Clarifies an Agent’s Obligation to Maintain Records
Once you accept the position of agent, you now have a legal relationship with the principal to act on his behalf. Until the principal dies or either the principal or agent terminates the relationship, the agent is expected to keep a record or receipts of all transactions made on behalf of the principal, such as payments, purchases, deposits and transfers.
Clarifies the Agent’s Authority over Financial Matters Related to Health Care
An agent is authorized to make decisions on the past, present or future payments for principal’s health care, but cannot make healthcare decisions on behalf of the principal, unless the agent is also the health care agent. To become a health care agent requires the principal to appoint the health care agent via a Health Care Proxy, which is a separate document that is not part of the discussion of this blog post, but more information could be found here.
Directs for the Form to Be Executed Before Two Witnesses and a Notary
The old regime required that the power of attorney be executed in the same way that one signs a deed or conveyance of real property. This meant that a power of attorney could be signed simply in the presence of a notary.
With the inclusion of the gifting options in the Power of Attorney form, and in an effort to curb fraud and abuse, the new law will require that the Power of Attorney be executed in front of two disinterested witnesses (one of whom can be a notary). Neither of the witnesses can be the agent, or the successor agent.
Allowance for Substantial Compliance instead of Exact Wording
Under the old regime, in order to be effective, one had to use the “exact wording” of the Statute and could not remove irrelevant clauses. For example, the older Power of Attorney statute included an optional provision for the designation of a monitor to ensure that the agent was following the rules and directions laid out by the principal. Under the old regime, if you crossed out the monitor section, or removed the monitor section, then the Power of Attorney could be deemed irrelevant.
Another one of the changes to the Power of Attorney now allows for “substantial compliance” rather than “exact wording.” This means that you can remove clauses that do not apply to your specific situation and still have the Power of Attorney be valid. This also means that you can add a date or a period. Simply put, minor spelling and punctuation errors, and omissions of irrelevant clauses are permissible, as long as the language is “essentially the same” as the statutory form.
Changes to Power of Attorney Provide Safe-Harbor Provisions
A third party will be held harmless against transactions conducted when he or she relies on a properly executed Statutory Short Form Power of Attorney in good faith. This basically means a third party will not be liable when he or she accepts a Statutory Short Form Power of Attorney where the signatures on the document were verified by a notary public, and the document was witnessed by at least two witnesses, unless the third party had knowledge that the signatures are not genuine or that the Power of Attorney or the agent’s authority is void, invalid or terminated.
Allow Sanctions for those who Unreasonably Refuse to Accept a Properly Executed Power of Attorney
Under the old regime, when a third party unreasonably rejects a properly executed statutory short form Power of Attorney, the principal bears the cost of suring the third party and compelling acceptance.
Under the new law, the Court may sanction against unreasonable rejection and award attorney fees and costs to the principal. For example, the following reasons are deemed unreasonable rejection:
- The Power of Attorney is not the formed used by the institution
- There has been a lapse of time since the Power of Attorney was executed
- There has been a lapse of time between the date of notarization of signatures
There are some nuances to the new statute. We are happy to discuss these nuances with you.
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