New York’s New Power of Attorney Law: Shorter, Simpler – Hopefully
By Alan D. Feller, Esq.
More than a decade ago, New York introduced an updated power of attorney form with two parts to replace the three- to four-page standard form that was used for many years.
The first section listed the chosen agents and the specific tasks (banking, real estate, taxes) to be handled. Part 2 was a statutory gift rider that controlled gifting and asset transfers for estate and long-term care planning. This longer form was supposed to reduce the risk of fraud and provide greater structure and clarity to all the people and financial institutions working with the power of attorney.
In a surprise to no one, the updated two-part power of attorney was overly complex and tricky to properly execute. Another development was more disturbing. The new form wasn’t honored by many financial institutions.
So what happened? Some financial institutions insisted on having their clients utilize the company’s form and did not accept the New York Statutory Power of Attorney form.
The problem was – and remains – that powers of attorney tend to be prepared for people with health issues. A power of attorney form’s creation is tied to the principal’s competency. For example, an unrevoked, executed Power of Attorney From 2015 remains valid, and if the principal (the person creating the power of attorney) has lost competency, they may be unable to make a new one.
Banks compelling a disabled or incompetent client to make a new power of attorney with their company-specific form is a huge problem. Without an accepted power of attorney in place, basic banking functions may not take place and a guardianship proceeding may be necessary to obtain a court appointment.
Starting July 13, the new Power of Attorney law will try to re-introduce some common sense to the preparation, execution and acceptance of this very important form. The major development is the requirement of a time-sensitive, written document from any party refusing to honor the power of attorney with reasons listed for the refusal. Added to this is a damages provision for legal actions to compel acceptance of a power of attorney. The expectation is that banks will not routinely reject powers of attorney because it will be costly to do so.
Also, under the new law existing powers of attorney would still be in effect, but new ones will have simpler execution rules. For principals who are unable to sign the form, they can more easily direct another person to sign on their behalf. This is a very helpful development for individuals who cannot physically sign the form due to illness or other circumstance. Furthermore, the document itself will be simpler. The two-part form will be replaced by a single, unified document.
Annual gifting amounts will be raised from the current $500 limit to $5,000. Financial matters related to health care will be covered more completely with the new form. A recordkeeping requirement for agents is also built into the law.
We will see how the new power of attorney form works in practice. Hopefully, simpler equals better.
Alan D. Feller, Esq. is managing partner of Sloan & Feller Attorneys at Law, located at 625 Route 6 in Mahopac. He can be reached at alandfeller@sloanandfeller.com.
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