The New York power of attorney law (POA) allows you to designate an agent to manage your financial affairs. It avoids the need for time-consuming and expensive guardianship proceedings when a person becomes incapacitated. The current power of attorney form can be complex and difficult to use. The new POA law, effective June 13, 2021, amends NY General Obligations Law to create a presumption in favor of the validity of a POA and makes rejection of the document by banks less likely. It also discourages banks and other financial institutions from improperly refusing to accept the form by allowing courts to impose penalties and attorney fees against institutions that do so. The changes include elimination of the Statutory Gift Rider, ability for another party to sign the POA for you at your direction, and clarification of the health care and retirement benefit provisions.
Elimination of the Statutory Gift Rider. The use of the Statutory Gift Rider added an extra level of complexity to the execution of POAs. With the new POA, the principal can grant the agent power to make annual gifts totaling $5,000 to those individuals and charitable organizations that the he primarily made gifts to. The principal can authorize gifts of more than $5,000 per year in the “Modifications” section.
A Person Other Than the Principal May Sign the POA. The new POA permits a person to sign the POA for the principal if : (1) the POA is dated and signed by such person in the presence of the principal, (2) such person signs at the direction of the principal, (3) the person’s signature is witnessed by two individuals that do not have an interest, (4) the person signing on behalf of the principal writes or prints the principal’s name and prints or signs his own name, and (5) the signature of the person signing on behalf of the principal is acknowledged by a notary public. The notary may act as one of the witnesses.
Elimination of the Exacting Wording Requirement. The POA law eliminates the requirement that a statutory POA contain the exact wording contained in the statute in order to be valid. If language in the POA “substantially conforms” to the statute, the POA will be valid. Insignificant mistakes in wording, spelling, punctuation, formatting or type face, or the use of language that is essentially the same though not identical, will not invalidate a POA. Furthermore, sections of the that are indicated as being optional can be omitted and replaced by the words “Intentionally Omitted.”
Creation of a Presumption That the POA Is Valid. In an effort to avoid POAs from being rejected by third parties without cause, the new POA law creates the presumption that a POA that is properly presented is valid. Third parties. Such as banks, doing business in New York cannot reject a properly executed POA unless they have reasonable cause. The recipient of a statutory POA executed after June 12, 2021 will have 10 days in which to either honor it or reject it in a writing, setting forth the reasons for the rejection. The agent, upon request of the third party, is permitted to certify any factual matter concerning the principal, the agent, or the POA so as to rectify a rejection, and the third party is permitted to rely on such certification. The third party may also request and rely upon an opinion of counsel concerning the POA.
If a third party rejects a POA and receives a written response to their reasons for rejection, the third party has seven days to either honor the POA or finally reject it in a writing providing the written reasons for their rejection. If it is determined that the third party did not act reasonably before rejecting the POA, a court may award damages including attorney fees and costs. This provision is retroactive to POAs executed prior to the effective date of the new provisions provided it was executed in accordance with the laws then in effect. If a third party acts reasonably when accepting the POA it will be protected against unauthorized acts of the agent.
Clarification of Health Care and Retirement Benefit Provisions. Powers relating to health care matters are limited to financial matters only and not health care decisions which are governed by a health care proxy. Powers granted relating to retirement benefits are limited to investment decisions, payment options and the exercise of any elections that the principal may be able to make. However, the agent may not change the designations of beneficiaries made by the principal unless such authority is expressly given in the “Modifications” section of the POA.
Contact attorney Robert Friedman at 716.542.5444 to have your power of attorney properly prepared and executed.