The most important document in your estate plan, other than a properly drafted Will or Trust, is undoubtedly your Power of Attorney. That is why it is important to understand the new changes to the New York Power of Attorney law, which will be effective on June 13th.
The new law will create a new “statutory short form” for a New York Power of Attorney, which will become the appropriate form to use after June 13, 2021. The form and the statutory provisions associated with it reflect a number of key changes outlined below.
Before I address the changes, please understand that if you currently have a New York Power of Attorney, the changes in the law do not make your form invalid. As soon as the form that you have was the appropriate form at the time and it was properly executed, it will continue to be valid.
So, with that said, what are some of the key changes to the New York Power of Attorney Law?
New York Statutory Gifts Rider Eliminated
The current New York Power of Attorney (POA) statutory short form (in effect until June 13) includes a Statutory Gifts Rider (SGR). The SGR has been in place since 2009 and is an optional part of the current POA form. If you opt to execute an SGR with the current POA, you can allow gifts in excess of $500 per person per year to be made on your behalf by your agent.
Unfortunately, there have been a number of cases where the current SGR form was not properly drafted or executed, which have resulted in significant problems. In order to address this issue, the SGR has been eliminated. In the new POA form, you can still allow for larger gifts to be made, but you will need to set forth exactly the nature of that authority in the Modification section of the new POA form.
Exact Wording Requirement Replaced
Under the prior law, certain sections of the statutory short form POA had to be exactly worded as set forth in the statute in order to be valid. Under the new law, the POA form needs instead to “substantially conform” with the statutory short form POA.
This may seem like a minor change, but under the prior law the “exact wording” standard could have serious consequences. In a 2015 case where a mother sought to bring a lawsuit on behalf of her daughter for personal injuries, the lawsuit was dismissed because she sought to bring it using a POA her daughter had granted her, but which did not meet the “exact wording” standard in place at that time.
More generally, some financial institutions have previously refused to honor POA forms which failed to meet the exact wording standard. In those cases, if the person who executed the POA was no longer able to do a new corrected POA form, this could result in no POA being available to manage that person’s financial affairs.
Timeline Established for Honoring POAs
On occasion, a financial institution may refuse to honor a POA form. Under the prior law, it was difficult to seek relief in those cases. Under the new law, there are key changes which will help protect individuals and their agents utilizing POA forms.
Under the new law, a timeline is established for honoring the POA. Within ten days of receiving a POA from an agent, a financial institution must: a) honor the POA, b) reject the POA with written reasons, or c) seek an affidavit from the agent verifying the legitimacy of the POA. If the POA is rejected, the agent can then provide a response to the financial institution. After the response is received, the financial institution has seven additional days to make a final determination to accept or reject the POA.
Damages and Legal Fees Available if POA Unreasonably Rejected
Under the prior law, financial institutions which rejected a POA form had little to fear because the agent would then need to bring a legal proceeding in order to force its acceptance. Such legal proceedings generally did not result in the financial institution being found legally responsible for damages or legal fees.
However, under the new law, if a proceeding is brought by the agent to compel a financial institution to accept a POA and a court finds the financial institution unreasonably refused to honor the POA, then the agent may be awarded damages and attorneys fees, as a result. This is a significant change which will hopefully result in financial institutions not refusing to honor POA forms unless they have a very good reason to do so.
The changes outlined above are some of the most important changes to the law, but they are not a comprehensive list. If you currently are contemplating executing a POA, you should make sure that you are using the new form and that you understand the substance of the document (including the key changes above). To ensure the POA is properly drafted and executed, you would be wise to obtain the assistance of an experienced estate planning attorney.
Matthew J. Dorsey, Esq. is a Partner with O’Connell and Aronowitz, 1 Court St., Saratoga Springs. Over his 23 years of practice, he has focused in the areas of elder law, estate planning, and estate administration. Mr. Dorsey can be reached at 518-584-5205, This email address is being protected from spambots. You need JavaScript enabled to view it., and www.oalaw.com.
