On December 15, 2020, New York Governor Cuomo signed legislation that changes the current power of attorney statute. The new law will go into effect on June 13, 2021. It makes some significant changes to the form, execution and use of a power of attorney in New York State, and appears to simplify and streamline the process.
A power of attorney is a central building block of any estate plan. A power of attorney allows you, the principal, to designate an agent or agents to act on your behalf with respect to your property and finances. Over the last year, the COVID-19 pandemic has highlighted the importance of having a power of attorney, as the need to assist family and loved ones has grown.
Under the previous law, the requirements for a power of attorney had to be strictly adhered to. The document had to be signed by the principal in the presence of two witnesses and a notary. Deviations from the statutory form could render the document invalid. Further, banks and other institutions would often reject a power of attorney if it did not conform to their internal standards. Below are some of the changes made to the statute that will go into effect in June:
Substantial Conformance: Under the new legislation, the standard for a power of attorney is “substantial conformance” with the statutory form. Previously, insignificant mistakes or the use of language that was not identical to the statutory form could invalidate the power of attorney. With this change, the presumption is that the power of attorney is valid.
Elimination of the Statutory Gifts Rider: Under the old law, an additional document called the Statutory Gifts Rider was required to be executed in addition to the power of attorney so that an agent may make gifts in excess of $500. The Statutory Gifts Rider had specific execution requirements, having to be signed by the principal and witnessed by two uninterested persons, and was the source of much confusion. Under the new law, the power to gift is included in the power of attorney itself in the modification section. Gifts can be made up to $5,000 and that maximum can be increased with an amendment to the modifications.
Signature Requirements: The new law allows the principal to direct a third party to sign the power of attorney on the principal’s behalf in the principal’s presence. The principal is required to have capacity and the third party must write or print the principal’s name and then sign their own name. This change is a significant departure from the previous requirement, particularly for those that are disabled or sick.
Rejection: The new law prohibits a third party from unreasonably rejecting a power of attorney. If a third party, such as a financial institution, rejects a power of attorney, the rejection must be in writing and sent to the principal and agent within 10 days of being presented with the form. A special proceeding may be brought to compel a third party to honor the power of attorney. If it is found that the third party acted unreasonably in refusing to honor the power of attorney, the court may award damages, which can include attorneys’ fees and costs. This change also provides protections to the third parties accepting the power of attorney in good faith. If a third-party acts in reliance on a properly executed power of attorney, that third party will later be held harmless for the transaction.
A power of attorney is an essential estate planning document that every adult eighteen years and older should have. The new law will not invalidate a power of attorney that was executed under the prior law, provided it was created in conformance with the then existing legal requirements. Nevertheless, it is important to review your power of attorney and estate planning documents every few years to ensure that the plan you have in place reflects your current wishes and circumstances. If you would like to update your power of attorney or if you need to create one, call the Law Offices of Steven M. Adler today and we will guide you through the process each step of the way.
At the Law Offices of Steven Adler, we prepare Advance Directives for our clients free of charge with any Will or Trust plan.
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