As we had discussed in a prior article, a statutory short form durable power of attorney (“POA”) is an important document which every New Yorker should consider. To recap, a POA allows any agents you select, typically your spouse and/or children, to make financial decisions for you. This can be crucial if you are sick and not able to manage your financial affairs, and the POA is a standard and essential component of any estate plan. However, I have also noticed a troubling phenomenon. Clients often come to my office with existing powers of attorney, the majority of which would have serious challenges raised by any institution which may be asked to accept them. In this article, I will try to highlight a sampling of the issues I have seen and what you should look for when deciding if you may need an updated power of attorney.
Outdated Power of Attorney:
The most common POA clients show me is a POA which was drafted and executed prior to September 12, 2010, which is when the new POA laws went into effect in New York. The new law requires a Statutory Gifts Rider if the principal wants to allow the agent to make gifts of over $500 per year, including gifts which help qualify the principal for long term care Medicaid services. NY GOL 5-1504 states that a bank must honor a properly executed POA if it conforms with the requirements of the 2010 law. The law also “grandfathers” statutory POAs which were executed prior to September 12, 2010, as long as they were executed properly. The problem is that, in practice, banks and other financial institutions routinely reject POAs executed prior to 9/12/2010, and are generally comfortably only accepting the new POAs. Therefore, we generally recommend that clients who have a POA executed prior to 9/12/2010 have a new power of attorney which incorporates all of the latest changes and which it makes it easier for their agents to act if the need ever arises.
Non New York/Non Statutory Power of Attorney:
Clients sometimes show me powers which are either not New York forms or, even if the language on the form states that they are valid in New York, are not statutory short form documents, which means banks do not have to accept them. I usually see that in the context of people who downloaded forms off the internet and filling them out themselves. It is important to note that each state has their laws regarding powers of attorney and that a power created under the laws of one state do not necessarily mean that it will be accepted in New York. It is equally vital to remember that a power of attorney created in New York must comport to the requirements of GOL 5-1501 - 5-1514 to enjoy the benefits of mandatory acceptance by financial institutions and that many online forms, even those claiming to be New York forms, do not comport to those rules.
Improperly Executed Power of Attorney:
While not as common as the aforementioned mistakes, I have seen otherwise valid POAs which simply have not been executed properly by the principal. The 2010 law requires a specific, and often time consuming, execution protocol which can trip up unwary clients and practitioners. A careful review by a seasoned New York elder care attorney is usually all it takes to uncover such defects.
Insufficient Power of Attorney:
Most attorney drafted POA’s that I review for clients fall into this category. The POA isn’t a simple off the shelf document. There are modifications which may, and almost always, should be added to it in order to give agents additional rights i.e. the rights to engage in Medicaid planning, to enroll in pooled trusts, to change beneficiary designations, etc. While many modifications may be made in the “Modifications” section of the actual POA, it is vital to execute an additional document, the Statutory Gifts Rider (“SGR”), at the same time as the POA. Without an SGR, many of the most power rights the principal can give to the agent are lost, including sheltering assets from long term care costs through the use of Medicaid trusts. I have found that, unless the POA was drafted by an estate planning or elder attorney, it is likely that it lacks an SGR and, consequently, a necessary document for effective incapacity planning.
In all these cases, the most unfortunate situation is finding the mistake only after the principal has lost capacity to execute a new one. I have seen enough harm caused by improper or incomplete powers of attorney to always recommend a review of an existing POA for my clients. The old adage from Benjamin Franklin is as true with regards to powers of attorney as it is in any other field: an ounce of prevention is worth a pound of cure.
To schedule a consultation with an estate planning and elder law attorney to discuss your existing power of attorney, or the preparation of new one, please contact our office at 347-766-2685.