Small but significant changes will soon be made to the New York State legal authority effective June 13, 2021. Legislation passed on December 13, 2020 and signed by Governor Andrew Cuomo enforced all powers after June 13, 2021 in New York must meet certain updated criteria to be valid.
The New York form is known for its strict language and execution requirements. With the last change of the requirements in 2009 and again in 2010, the state combined the then applicable forms for permanent, non-permanent and jumping powers of attorney and increased the legal form to 14 pages including a separate legal gift driver. (Omitting this driver is one of the major highlights of the public policy-driven changes to the new shape.)
Important changes
While revisions to the New York state form of the Power of Attorney have been considered in recent years, the pandemic situation in the past fourteen months may have prompted lawmakers to finally update the form of the Power of Attorney to make it more efficient to execute and use. Once fatal shortcomings in the preparation and execution of New York powers are now given in certain situations. In particular, a previous requirement was that the legal power of attorney must contain the exact wording as stipulated in the law. The new law stipulates that any wording that is “substantially the same” will be considered acceptable, taking into account minor changes or errors in the drafting. At present, powers of attorney have been and are being refused due to errors in the “exact wording”. The new law also provides built-in forgiveness for (i) a minor mistake in wording, spelling, punctuation, or formatting, or the use of bold or italic, or (ii) the use of language or formatting that is essentially the same how, but not identical to the legal form, including the use of language from a previous law (Chapter 323). However, the best practice will continue to be used in the legal form whenever possible.
One change that is likely a direct result of the pandemic is the new rule that powers of attorney no longer need to be carried out personally by the client if the power of attorney is signed on behalf of the client by someone other than the agent’s presence and on Instructions from the client. This aspect can be a game changer for seriously ill or infirm customers who wish to appoint agents by proxy but may not be able to hold or effectively control a pen to sign for themselves.
The law now creates a presumption of validity of powers of attorney enforced after June 13, 2021, and sets other parameters for accepting or rejecting any form of power of attorney that did not previously exist. A person who in good faith accepts a recognized and attested power of attorney without actually knowing that the signature is not authentic can rely on the assumption that the signature is genuine. Likewise a person who in good faith accepts a recognized and attested power of attorney without actually knowing that the power of attorney in question is void, invalid or terminated or that the agent’s authority is void, invalid or terminated or that the authorized representative exceeds or the Inadmissible exercise of the power of attorney can be based on the relevant power of attorney.
The new law provides that all duly presented powers of attorney are valid, which prevents third parties from rejecting them without reason. Each party who receives a power of attorney executed on the new form has a ten-day window to either accept it or reject it in writing and state the reasons for the rejection. Any person or institution asked to accept the power of attorney may either request an affidavit confirmed by the proxy with full force and effect or a legal counsel for a statement on questions of power of attorney and rely on such evidence without further investigation.
While the changes are generally intended to simplify the process and ensure that the client’s wishes can be met despite a minor error or problem with the submission of the Power of Attorney, there are also some additional requirements. The new law stipulates that the power of attorney is now witnessed by two people who are not named in the document as authorized representatives or as authorized recipients of gifts. It should be noted that the person receiving the confirmation can also act as a witness, which can make it easier to carry out. In its current form, the two-witness requirement was reserved for the legal gift driver.
Effects of real estate transactions
Identifying these changes and using the appropriate form is important to New York estate planning and real estate attorneys, as well as others who frequently execute documents on behalf of their clients under changed powers in connection with a particular transaction. For real estate transactions, documents signed under power of attorney must be submitted for recording along with the original power of attorney itself. Real estate professionals usually prepare an amended power of attorney in the legal form in connection with a specific transaction. The form contains a section that allows for changes to the agent’s powers, where the attorney would generally indicate that the power of attorney is valid only in relation to the particular real estate (or cooperative housing) transaction. As a result, real estate attorneys prepare revised powers of attorney relatively often for clients and must ensure that they are using the correct up-to-date form in order for the documents (deeds, mortgages, etc.) to be accepted by the recorder and / or the cooperative administrator. Failure to properly execute the power of attorney on the correct form can and will result in a delay or postponement of the planned completion of a real estate transaction, so this is regularly relevant.
It should be noted that validly executed powers of attorney that were valid on the current form, which was executed on or before June 12, 2021, are still valid.
Effects on Trust and Estate
Some aspects of the new legislation that will make the work of client advisors and fiduciary and estate attorneys easier are:
- Presumption of validity Third parties doing business in New York can no longer refuse a power of attorney that has been properly executed without good cause. You have ten days to either honor or reject the authority in a letter setting out the reasons for the rejection. The agent can respond to correct the denial and the third party has an additional seven days to decline or comply with the authorization. If it is later determined that the third party did not act adequately in its rejection, a court may award damages, including legal fees and costs. In addition, the changes in the law provide that a third party, if he appropriately accepts the power of attorney, is protected from unauthorized acts by the representative. This is an important addition as the protection is extended to third parties who accept the power of attorney under a power of attorney based in good faith without knowledge of the client’s signature.
- Annual gift increase The previous power of attorney limited the agent’s annual gifts to $ 500. that has now been increased to $ 5,000. The client can of course authorize the agent to give the agent major gifts or presents in the “Changes” section.
- Health and retirement benefits The amended statute makes it clear that the powers granted to the broker in relation to retirement benefits are limited only to payment options and investment decisions. As with the previous form of power of attorney, the client must expressly authorize the agent to change the name of the recipient for retirement benefits if the client wishes the agent to have such a power of attorney. The amendment also clarifies that all health-related powers are limited to payment and financial matters only. Health care decisions will continue to be governed by health care professionals and end-of-life decisions will continue to be governed by Living Wills.
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