THE NEW POWER OF ATTORNEY: WHAT TO KNOW
New York State recently enacted legislation simplifying the form of Power of Attorney (“POA”), which law went into effect June 13, 2021. After such date, the new form of POA is required to be used.
WHAT IS A POWER OF ATTORNEY?
As you may know, a POA is a legal document by which a person (called the “Principal”) grants one or more person(s) (the Agent(s)) the power to manage financial affairs of the Principal. It is a frequently used document in circumstances of illness, disability and lack of capacity, or in transactions where the Principal cannot be present to sign necessary legal documents. This is a powerful document as it allows the Agent to stand in the shoes of the Principal for the Principal’s financial affairs, which include but are not limited to banking transactions, real estate transactions, insurance transactions, estate transactions, claims and litigation, and business operating transactions.
A POA qualifies as what is referred to as a “Statutory Short Form” when it complies with the requirements included in §5-1513 of New York’s General Obligations Law.
The new law is meant to simplify and improve the Statutory Short Form Power of Attorney. Some highlights of the changes include:
- Execution of the new form of POA has been simplified.
- The Statutory Gifts Rider (required to make gifts in excess of $500) has been eliminated. The basic gifting amount has been increased to $5,000, and any additional gifting authority can be included in the Modifications section of the new POA form.
- The new form must only substantially conform with the language suggested by the statute. Under the old law, the wording had to be exact or the form was “invalid”.
- Financial institutions are required to honor or reject the new form of POA within ten (10) business days of submission, and must provide you with a valid reason in writing if it is rejected.
- A financial institution which unreasonably refuses to accept a POA can be sued, and you can be awarded damages and attorney fees. Moreover, the new law includes a remedy for damages including reasonable attorneys’ fees to address the issue of POAs being rejected for reasons not related to validity. Damages will be allowed for unreasonable denial of a POA that substantially complies with the law.
- A third party may sign on behalf of the Principal at the Principal’s direction. This is meant to simplify the execution of a POA by a Principal who has capacity but is under a physical disability.
- The POA must be acknowledged and witnessed by 2 individuals who are not named in the instrument as agents or as permissible recipients of gifts.
- An Agent’s record keeping duties has been clarified. The Agent must keep record of all transactions made on behalf of the Principal or alternatively, must keep all receipts of payments and transactions conducted for the Principal.
- An Agent will be considered a personal representative for the purpose of health care financial matters. This means that health care providers must provide an Agent with the information necessary to determine the validity and accuracy of charges for health care related matters.
- Finally, the POA must be printed in clear type no less than 12 point in size.
IS THE OLD POWER OF ATTORNEY STILL EFFECTIVE?
Yes, the new law does not affect previously executed Powers of Attorney. The old Statutory Powers of Attorney which were properly signed are still valid and do not need to be updated. However, the new POA has extra protections, so you should consider updating to the new form if your needs, wishes or circumstances have changed.
The Power of Attorney is a powerful document, and we strongly urge that you consult with an attorney in connection with executing a Power of Attorney. If you have any questions about your existing Power of Attorney, putting a new one in place, or relating to any other estate plan documents, please contact us at 631-777-2401 ext. 31 or email@example.com.