What it is advisable know concerning the newest modifications to the New York Power of Attorney Act | Thompson Coburn LLP
It is important for every adult to include a Power of Attorney (“POA”) in their financial and estate planning records. Without a power of attorney, no one would be empowered or able to regulate that person’s financial affairs in the event of incapacity, unless a person’s assets are jointly held or held by a trust. Then an expensive and lengthy judicial process to appoint a supervisor would be required.
POAs are not tools that we use later in life. At the start of the school year, any parent of a student entering college should consider having that young adult perform a POA to allow a parent or other adult to do financial affairs or even get access to their child’s living quarters becomes necessary.
Late last year, New York State legislature made significant changes to the New York Power of Attorney Act, which went into effect June 13, 2021. Given these changes, it is important for New Yorkers and others who have run New York POAs to review them at this time and consider updating them.
Background to the changes
In New York, Title 15 of Article 5 of the New York General Obligations Act provides an “abbreviated legal power of attorney” that allows an individual, the principal, to appoint a representative to act on behalf of the principal in personal and financial matters. The POA form can consist of several pages, especially if permissible changes are added, but is still referred to as a legal short form because the language-lending authority is designed to contain the full description of each authority listed on the “short form” and the scope of the Agent’s authorized transactions as set forth in the Articles of Association under that authority. Many other states have laws with similar proposed forms.
Financial institutions and other third parties often refuse to respect valid, properly issued powers of attorney. The amendments to the New York Powers of Attorney Act, which went into effect in June, aim to simplify the POA form and reduce the frequency of refusals by financial institutions to recognize legally executed POAs.
Under previous law, which came into force in 2009, the slightest deviation of the POA form from the legal language would render the form invalid. The legal form also restricted the agent’s ability to give gifts so that only a total of $ 500 per year in gifts could be given, unless the principal had run a separate Statutory Gift Rider (“SGR”). In addition, the old law did not provide for sanctions or penalties against third parties who refuse to adhere to a valid POA.
The new law provides for the following major changes:
- Essential compliance with the legal language. The new law requires that a POA form “substantially match” the language of General Obligations Act §5-1513 and states that the POA language need not be the same as the POA form in NY GOL §5-1513 . It enables a POA form to be valid even if the form has insignificant errors in spelling, punctuation, formatting, or text that deviates slightly from the legally required POA form language. However, the following two warnings in NY GOL §5-1513 cannot be omitted from the POA: the “Important Information for the Agent” clause and the “Caution for the Client” clause.
- Abolition of the legal gift driver. In order to authorize the agent to give gifts in excess of $ 500 a year, the principal had to prepare the separate SGR beforehand, which required two witnesses for the principal’s signature and notarial confirmation. The change in law allows a principal to authorize the agent to give gifts totaling $ 5,000 annually, and additionally allows the principal to change the standard POA form to authorize the agent to give gifts in excess of $ 5,000 per year Year to make the agent give gifts to himself or make other gift transactions and changes in ownership of the principal without a separate SGR.
- Penalties for improperly refusing to accept a valid POA. As noted above, financial institutions have often refused to accept a valid, properly executed POA, or have only accepted their own form of POA. The previous law did not provide for penalties for improperly refusing to respect POA. The new law allows courts to award damages, including reasonable attorney fees and expenses, if it is found that a third party has inappropriately refused to accept a POA. The law contains a list of the circumstances in which the rejection of a POA may be considered appropriate and a timetable. The recipient of a POA has 10 days after receipt of the POA to either accept or reject it, or to request an affidavit from the agent or a statement from the client’s legal advisor, and must either accept the POA in writing or decline receipt within seven days the affidavit or the opinion of a lawyer.
- Safe Harbor for third parties acting in good faith. The new law creates a safe haven for recipients of a POA if the recipient acts in good faith in accepting the POA, even if it is later declared invalid. Such a recipient is shielded from liability if the following conditions are met: (a) the POA must have a signature of the principal certified by a notary or a person authorized to accept confirmations and (b) the recipient must not have “actual knowledge “Have that the client’s signature is forged, the POA is invalid or the agent is abusing his powers.
- Prerequisite for execution. A legal power of attorney in short form or a power of attorney not required by law issued in New York by a principal must: (a) be written or printed in legible or clear letters of at least twelve commas and (b) by a legally competent principal or im The name of such a principal must be signed, initialed and dated in the presence and on the instruction of the principal by a person other than a person who has not been named as an authorized representative or successor authorized representative of the principal. In any case, the signature of the person signing must be duly certified and confirmed by a notary and must be witnessed by two people who are not named in the document as authorized representatives or authorized recipients of gifts, clients. The person receiving the confirmation can also act as a witness.
While third parties can more easily accept the new POA form, powers of attorney and legally required gifts previously properly executed under the law in force at the time of execution will remain in effect.