New York State has enacted an update to its Power of Attorney Law that will take effect on June 13, 2021. New York’s Statutory Short Form Power of Attorney, last updated in 2010, was notorious for its complexity and difficulty to execute. It often baffled clients who didn’t know where to sign or initial and often times required the presence of an attorney to execute properly. This was particularly problematic for residents of nursing homes and assisted living facilities seeking to execute the advance directive during the pandemic. It was also incredibly technically strict. The exact wording of the document needed to be precisely followed and irrelevant provisions could not be removed without invalidating the document.
The reason the old NY Power of Attorney law was so exacting was in an effort to prevent fraud and abuse to vulnerable individuals. However, the statute took things a bit too far and created a situation where the Power of Attorney was too complex and often rejected by financial institutions. The document’s requirements created situations where it was sometimes necessary to engage in cumbersome and expensive Guardianship proceedings. The new law relaxes certain requirements including the requirement that exact wording be used. The new law only asks for substantial compliance thereby reducing the risk that executed documents will be found invalid.
Perhaps the aspect of the old Power of Attorney that people found most difficult to understand was the separate nature of the Power of Attorney and its Statutory gifts Rider. If a Principal wished to give their agent the authority to make gifts of their assets (which is often done in estate and long-term care planning situations), they had to also execute the Power of Attorney Statutory Gifts Rider. If they did not, their agent was limited to makings gifts of $500 per year. The new statute eliminates the separate Gifts Rider and authorizes agents to make gifts up to $5,000 per year with the option to increase this limit through the inclusion of a simple authorizing provision. This eliminates a great deal of confusion as well as the need to have a separate additional document signed and notarized.
Another major addition to the Power of Attorney Law allows the principal to have someone sign the Power of Attorney for them at their direction. This means that those individuals who are have full mental capacity but who are physically incapable of signing will be able to execute a Power of Attorney to gain assistance with their financial affairs rather than resorting to having a Guardian named on their behalf. The former inability to direct someone to execute your Power of Attorney confused many as a person has long been able to direct someone to sign their Last Will and Testament on their behalf. It lacked logic that you could direct the disposition of your entire estate to a third party, yet a Power of Attorney must be signed personally.
One group that the new law makes things more difficult for is the third parties, such as banks, who wish to reject a valid Power of Attorney. The updated Power of Attorney law discourages financial institutions from refusing to accept the form because a judge is now permitted to impose penalties and attorney’s fees against institutions that unreasonable reject a validly executed power of attorney. The update will hold a third party harmless against any transaction conducted when he or she relies in good faith on a properly executed Statutory Short Form Power of Attorney. Therefore, unless the third party knows the agent’s power has been terminated or is otherwise invalid, if a document appears to be validly executed, they must accept it. The refusal to honor a power of attorney must now be made in writing to the principal and the agent within 10 business days and the writing must include the specific reasons for the refusal. It will be deemed unreasonable to reject a Power of Attorney for the following reasons: (1) The Power of Attorney is not the form used by the financial institution; (2) Time has elapsed since the Power of Attorney was executed; (3) Time elapsed between the date of notarization of signatures.
Additional changes to the Power of Attorney statue include:
Finally, it should be noted that the document must now be executed in the presence of two disinterested witnesses and a notary. The witnesses cannot be the Principal’s agents or successor agents. The additional witness requirement has now been included since the gifting provision is not included in the Power of Attorney itself and not in a separate Gifts Rider.
It should be noted that existing Powers of Attorney remain effective. Please call us to discuss the new Power of Attorney law and its implications for you and your estate plan.
The Law Offices of Roman Aminov is an award winning Queens estate planning & probate lawyer. Call us now at 347-766-2685 to discuss your options and prepare for your future needs.
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