By: Juliya Ismailov
On December 15, 2020, Governor Cuomo signed into law an amendment to the New York statute governing a Power of Attorney (POA). Before discussing the changes in the POA law below, we provide brief context regarding Powers of Attorney.
A Power of Attorney authorizes an agent to act on behalf of the principal with respect to financial matters. A POA operates while the "principal" creating the POA is alive, unlike a Last Will, which governs assets upon a person's death.
A POA can be effective immediately or upon a future event, and this is the decision that the principal has to make. A "Springing" POA "springs" into effect upon the principal's disability as confirmed by written physician statements. By contrast, a "durable" POA is effective immediately, and this is suitable where the principal trusts the agent will not use the POA unless it is necessary, or the principal wishes to delegate some responsibility over financial affairs to a trustworthy agent for a limited or unlimited purpose or duration. Hybrid POAs are a possibility as well, for example, where the POA is "durable" as to spouse as agent, and "springing" as to any successor agents.
In New York, as in other states like California, the statute governing Powers of Attorney provides a "statutory short-form" template that is generally preferred by practitioners to preparing a "non-statutory" freestyle document.
With the above background in mind, below is a summary of the key changes to the New York Power of Attorney statute. The changes are intended to simplify the preparation and execution of POAs and their acceptance by third parties, like banks, while maintaining safeguards against abuse of the powers granted in the document:
Expansion of definition of statutory short-form power of attorney to include document wording that “substantially conforms,” but is not identical, to the statutory language. Therefore, it is now possible to omit clauses that do not apply to the client, with the goal of enabling shorter, more easily understood POA documents that are more readily accepted by third parties.
Allowing POA to be signed on behalf of principal, at the principal’s direction while in their presence, creating more flexibility to execute a POA while still maintaining safeguards against fraud.
Elimination of the statutory gift rider in favor of “optional” gift transactions clause within the POA document, with standard minimum for gifts increased from $500 to $5,000, and an option to authorize gifts in excess of $5,000.
Expansion of protection for third-parties relying on POA, requiring actual knowledge of deficiency in the POA by the third-party to create liability; third parties may request certification by the agent as to any factual matter, or opinion of legal counsel as to any matter of law concerning the POA.
Limitation on time for third parties like banks to accept or reject POA, to generally 10 days, and requiring a written explanation for a rejection; otherwise damages (attorneys’ fees and costs) can be awarded for unreasonably rejecting POAs.
Effective June 13, 2021 (180 days after 12/15/2020).