New York’s new energy of legal professional: Aid for households

This is a scenario that many lawyers dealing with the frail and elderly have seen. Jeanne S., who is 90 years old and recently lost her husband, was fine until she was unable to manage her financial affairs after a sudden stroke.

Fortunately, when Jeanne’s will was updated, her lawyer had her sign a permanent power of attorney naming her daughter as her agent. Her daughter takes the form to Jeanne’s bank, but they refuse to keep it because it is too old and not an official bank document.

Meanwhile, Jeanne’s electricity, insurance and mortgage bills remain unpaid. Ironically, the same bank that refused to comply is running up late fees and facing foreclosure on its mortgage.

The New York Power of Attorney Act, which has been in force since 2009, has long obliged banks and financial institutions to comply with the statutory power of attorney that Jeanne has signed. But until now there has been no penalty if a third party refused to respect this form.

A court was not empowered to award attorneys’ fees, costs or damages, so there was no effective enforcement mechanism. Many banks, instead of risking liability for accepting an invalid form, got it wrong by simply saying no.

New law based on NY State Bar proposal

That changed on June 13th when New York’s new Power of Attorney Act went into effect. The revised law simplifies the form and adds provisions to prevent fraud and abuse.

But most importantly, it puts damages and attorney’s fees into the law’s enforcement provisions and creates a power of attorney acceptance schedule that allows an agent to start signing checks and paying bills within a reasonable time.

The changes were based on a proposal from the New York State Bar Association, whose members struggled with the arduous provisions of the previous law for eleven years. The updates were adopted in 2020, followed by a six month “learning period” before they went into effect. In March, at the request of the governor, a provision was added requiring two people to witness the signing of the document to prevent fraud or abuse.

New York joins a growing number of states

Much of New York’s law is based on the Uniform Power of Attorney Act, which has served as a model for states across the country.

With the passage of the new law, New York joins a growing number of states – including Alaska, Florida, Indiana, Massachusetts, and Pennsylvania – that haven’t adopted the Uniform Power of Attorney Act but allow a court to collect attorney’s fees and costs and costs to award damages due to unreasonable refusal of a power of attorney. Indiana has gone so far as to pay three times the actual damage.

In dealing with the compensation for the unreasonable refusal of a valid power of attorney, the Uniform Power of Attorney Act contains provisions on reasonable attorney fees and costs incurred for legal efforts to enforce acceptance.

States may change the provisions of the Uniform Power of Attorney Act. For example, the Iowa version of the law contains a specific provision that authorizes the court to award damages in addition to reasonable attorney fees and expenses.

The new law also states that the form must essentially match the wording of the law, rather than the exact wording, which makes it easier for banks to ensure that a form is correct despite small errors. To prevent fraud, you also need a notarial certification and two witnesses, one of whom can be the notary.

We hope that the new law will simplify the process of drawing up and using a power of attorney and reassure the elderly and disabled that someone acting as their proxy will be able to manage their finances if they become incapacitated.

Looking ahead, attorneys and others preparing and receiving New York powers must know several new facts:

  1. You should be aware that documents that were valid under applicable law when they were executed remain valid.
  2. However, if an obsolete form is used on or after June 13th, the power of attorney will no longer be valid as it does not have the two required witnesses.
  3. With the Gift Rider abolished in New York, the amendment section of the Power of Attorney form must be carefully worked out if the option to give gifts or transfer property from the principal is to be included.
  4. The regulations on damages and legal fees apply to all existing powers of attorney.

The simplified form is intended to make it easier for laypeople who issue a power of attorney to understand what they are signing. However, the writers must understand the law in all of its nuances. Banks and financial institutions must put in place procedures for accepting or rejecting a power of attorney in order to avoid liability.

This column does not necessarily represent the opinion of the Bureau of National Affairs, Inc. or its owners.

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Information about the author

David gold color is Counsel to Grimaldi & Yeung LLP. He is the past chairman of the Elderly Rights and Special Supplies section of the New York State Bar Association. He was a member of the NYSBA Task Force on the Power of Attorney and helped draft the changes that went into effect in 2020 and 2021. He led a team of attorneys who developed the power of attorney form published by the New York State Bar Association.

Richard A. Weinblatt is a partner at Haley Weinblatt & Calcagni LLP’s Islandia, NY committee. He is also an Associate Professor at Touro College’s Jacob D. Fuchsberg Law Center.

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