Paula M Jones
Paula M. Jones Law Offices, New York and Philadelphia
paula@paulajoneslaw.com

Practitioners will no longer need to apologise to their estate planning clients regarding the form of power of attorney required throughout the State of New York. The statutory form – stretching to almost 15 pages – has been reworked after many years of frustration for attorneys and their clients alike. In December 2020, a new law governing these powers was enacted, taking effect on 13 June 2021. Powers of attorney executed prior to that date are still effective.

The law is a welcome change to the onerous power of attorney form, in place in New York State for more than a decade. The power consisted of a short form, in which an agent is named to act on behalf of the principal for various financial transactions, as well as an optional statutory gifts rider, detailing the extent of allowable asset transfers exceeding $500 annually from the principal to intended beneficiaries.

The new power of attorney condenses these two portions into a single, user-friendly format, giving practitioners and their clients hope that it will be significantly better organised and easier to understand.

Key changes to the new power of attorney

Gifting

The prior limit of $500 in annual gifts has been increased to $5,000. The principal can still grant authority to make larger gifts, however, if they so desire.

Agent responsibility

The new law clarifies that an agent is required to maintain records and receipts of all financial transactions conducted while acting on behalf of the principal.

Retirement plans

The new law clarifies that an agent has limited powers in regard to the principal’s retirement plans. The agent may select payment options and make investment decisions, but has no authority to change the beneficiary designation unless the principal has expressly given that authority.

Coordination with healthcare issues

The new power also clarifies that:

• any powers relating to healthcare under the new power of attorney are limited to healthcare-related payments;
• all healthcare decisions are governed by healthcare proxies; and
• end-of-life decisions are governed by living wills.

Execution requirements

Under the former power, only the statutory gifts rider required two witnesses (as well as an acknowledgement).

Powers must now be witnessed by two disinterested persons – those who are not named in the instrument as agents or as permissible gift recipients – and acknowledged. There is an important change for those clients who may be too physically infirm to personally sign their power. The power may be signed by a third party (other than the agent) in the principal’s presence, at the principal’s direction. This change alleviates the limitations in those instances where a valid power is particularly crucial.

Format

Powers under the new law no longer need to match the New York statute’s exact wording but must only ‘substantially’ conform. This welcome change maintains a power’s integrity even when insignificant mistakes in wording, spelling, punctuation or formatting occur. It also allows for variety in bold or italic type. Finally, it allows language or formatting that is essentially the same as, but not identical to, the statutory form, including language from a previous statute.

The new law now creates a presumption of validity for a power. A third-party recipient of a power, acting in good faith, may presume that a witnessed and acknowledged signature on a power is valid, as long as the party has no actual knowledge that the signature is not genuine.

Similarly, a third party is able to rely on a power as valid if the party lacks any knowledge:

• that a power is void, invalid or terminated;
• that the agent’s authority is void, invalid or terminated; or
• that the agent is exceeding or improperly exercising the power.

Attorneys are used to fielding calls from frustrated clients presenting a power of attorney to a financial institution, who is either refusing to accept it or is insisting that a principal sign the financial institution’s own form – even when the principal lacks the legal capacity to do so.

Those organisations presented with a power of attorney are now required to:

• honour a power of attorney within ten business days after it is presented;
• reject it in writing specifying the reasons for said rejection; or
• request an agent’s affidavit stating that the power of attorney is still in full force and effect.

A court may award damages, including attorneys’ fees, if a special proceeding must be brought to compel that the power of attorney be honoured. Much to the relief of frustrated attorneys and agents everywhere, the new law finally provides the legal teeth necessary for financial institutions to take notice of powers of attorney.