By: Lori R. Somekh, J.D.
The law in New York regarding the requirements of a valid Power of Attorney ("POA") has recently been changed. This law becomes effective as of September 1, 2009. The following is a summary of some of the relevant changes:
-Two people must now witness the grantor’s signature;
-The agent must now sign the Power of Attorney and have his or her signature notarized;
-If you want your agent to make gifts (for tax planning or any other purpose, such as Medicaid planning), you must execute a Major Gift Rider, which has additional execution requirements;
-The statute also creates specific fiduciary responsibilities for the agent;
-The Power of Attorney will be durable (i.e. not affected by the principal’s later incapacity) unless otherwise provided (see below); This is the opposite of the prior rule;
-You may now have an independent person act as a monitor for the agent;
These changes become effective September 1, 2009, although POA’s executed before that date in compliance with prior law will still be valid.
Acceptance and Execution by the Agent - a New Requirement:
The Power of Attorney must now be signed, dated and duly acknowledged, not only by
the principal, but also by the agent. NY G.O.L.§5-1501B subd.1 ( c).
Power of Attorney Presumed Durable:
The new law provides that the form is "durable" unless it provides that the powers terminate upon the incapacity of the principal. NY G.O.L. §5-1501A. If a guardian is later appointed, the agent shall account to the guardian rather than the principal. NY G.O.L. §5-1501A. The term "Durable Power of Attorney means that the instrument remains in effect even after you become incapacitated, if you do. Under the prior rules, a general POA becomes void if the principal later loses capacity.
The Major Gifs Rider:
To be valid for the purpose of authorizing the agent to make gifts, a statutory short form Power of Attorney must contain the gift giving authority initialed by the principal and be accompanied by valid statutory Major Gifts Rider (MGR). The MGR must be executed pursuant to the requirements of NY G.O.L. §5-1514 A subd. 9 (b), which includes being acknowledged and witnessed by two witnesses (like in the execution of a Will). Non statutory Powers of Attorney appear to be still permissible, provided certain rules are followed, but a non-statutory Power of Attorney which contains gift giving authority must be similarly acknowledged and witnessed. NY G.O.L. §5-1501B subd.2(b). This is something some elder law attorneys have already been doing.
The authority to create and fund trust is removed from NY G.O.L. §5-1502C, and now appears as a specific provision in the statutory MGR to "create, amend, revoke, or terminate an inter vivos trust". Similarly the statutory authority to designate beneficiaries on insurance is removed from NY G.O.L. §5-1502 F. The authority to create joint accounts or modify "Totten trust" beneficiaries must be included in MGR. NY G.O.L. §5-1502D subd.1(a) and (b). The same is true to change beneficiaries on retirement benefit plans. NY G.O.L. §5-1502L subd.2. Certain small gifts ($500 each and under in a calendar year) to individuals and charities, which continue a custom of the principal, can be made by the agent without a MGR. NY G.O.L. §5-1501I subd. 14.
Provisions regarding health care billing and payment matters, should allow access to health care records in accordance with HIPPA requirements. NY G.O.L. §5-1502K.
Provisions can be added to the statutory short form or MGR in the section labeled "modifications". These modifications can eliminate a power in one of the sections of the statute, supplement a power, or add a provision not inconsistent with the other provisions of the form. NY G.O.L. §5-1503.
Effective Date of POA:
The date on which an agent’s signature is acknowledged is the effective date of the power of attorney as to that agent; if two or more agents are designated to act together, the power of attorney takes effect when all the agents so designated have signed the power of attorney with their signatures acknowledged. NY G.O.L. §5-1501B subd. 3(a).
Acceptance by Third Party Mandatory:
Acceptance of the new statutory short form power of attorney is mandated and a third party cannot refuse to honor the statutory short form, a MGR, or a POA properly executed under the laws in effect at this time it was executed, without reasonable cause. NY G.O.L. §5-1504. The statute provides it is unreasonable for a third party to require their own form or to object because of the lapse of time since the execution, or to the lapse of time between acknowledgment by the principal and the agent. NY G.O.L. §5-1504 subd. 1 (b). This requirement should help eliminate the persistent problems we have encountered with banks refusing to accept POAs in the past.
Fiduciary Duty Imposed and Defined:
The new law provides a "prudent person standare of care" with defined fiduciary responsibilities. This includes record keeping (including keeping receipts) and the agent is required to make records available within 15 days of a written request by a monitor, co-agent, certain governmental entities, a court evaluator, a guardian, or a representative of the principal’s estate. NY G.O.L. §5-1505. An agent may be liable for conduct or omissions which violate the fiduciary duty. NY G.O.L. §5-1505 subd. 2.(b). An agent may resign by following the procedures in the statute. NY G.O.L. §5-1505 subd. 3.
A Monitor can be Appointed:
In the new form there is an optional provision that the principal can appoint a "monitor" to request and receive records of transactions by the agent. NY G.O.L. §5-1501. Note: these provisions regarding fiduciary responsibilities and special proceedings apply to all powers of attorney including those executed before the effective date of the new law.
New POA Automatically Revokes Prior POA:
Executing the new POA revokes any prior power of attorney, unless you provide otherwise.
Prior POAs are "Grandfathered" - Still Valid:
Statutory Short Form Powers of Attorney properly executed in accordance with the law in effect at the time of their execution remain valid and must be honored. NY G.O.L. §5-1504.
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The foregoing is provided for general information purposes only. It does not constitute legal advice, nor is an attorney-client relationship formed. While every attempt has been made to provide accurate information, we are not responsible for errors, and point out that the new law is still in its earliest phases and its interpretation and application are subject to change
