Significant Changes You Should Know About the Power of Attorney Law
By Salvatore M. Di Costanzo
On Dec. 15, 2020, Gov. Andrew Cuomo signed into law legislation substantially amending the New York General Obligations Law which governs powers of attorney in the state.
Effective June 13, the new law, among other things, modified the power of attorney form. The new form must now be used, although a power of attorney drafted prior to the effective date is still valid.
Here is a brief overview of the key changes as a result of the new legislation.
Substantial Conformity. One of the nuances of the old law was that the form of the power of attorney signed by the principal (meaning you) needed to exactly match the wording of the form provided by the statute. For the unwary, a slight alteration to the form, in the wrong place, may have resulted in it being considered a “non-statutory” form, thereby losing the protections of the statute.
Under the new law, the form signed by the principal only needs to “substantially conform” to the wording of the form found in the statute. This makes it much easier to rely on the statutory provisions benefiting powers of attorney such as imposing sanctions on those who unreasonably refuse to accept the power of attorney.
Elimination of Statutory Gifts Rider. This is a very cumbersome aspect of the old statute centered around the statutory gifts rider. The statutory gifts rider was necessary – and required – to allow your agent to exercise any power that might change your beneficial interest. For instance, to transfer your assets to a family member or to change beneficiary designations on your accounts, a statutory gifts rider would be necessary.
The statutory gifts rider was complex, but it was also often improperly implemented. For instance, for it to be effective, a box on the power of attorney needed to be initialed. Moreover, the rider needed to be signed at the same time as the power of attorney otherwise it was invalid.
The new law eliminates rider. While this may appear to simplify things, great care must be taken to incorporate those modifications ordinarily found in a statutory gifts rider into the new power of attorney form. This is not a straightforward assignment and counsel must be sought.
Acceptance and Reliance by Others. A practical issue with powers of attorney is that many financial institutions might refuse to honor the form simply because it is not the form prescribed by their legal department. It has always been unlawful to unreasonably refuse to honor a valid statutory short form power of attorney; however, there were no consequences to doing so.
Now, to encourage acceptance of the form, the new law imposes sanctions, such as legal fees, on those who unreasonably refuse to accept a valid statutory short form power of attorney. To further encourage acceptance, a third party who reasonably accepts a power of attorney form properly acknowledged and witnessed shall not be held liable for any unauthorized transactions by the agent.
Signing at the Direction of Another. Here is an interesting tidbit. In New York, one can direct another to sign a Last Will and Testament on one’s behalf. Similarly, the new law allows a power of attorney to be signed on behalf of the principal by someone other than the agent, in the principal’s presence and at the direction of the principal.
There are several other technical changes made by the new legislation that require the expertise of counsel who regularly practices in this area. The consequences of having an improper power of attorney may lead to an unanticipated guardianship proceeding where a judge will appoint someone to handle your affairs. The implementation of the new law is an opportune time to meet with us and review your overall estate plan.
Salvatore M. Di Costanzo is a partner with Maker, Fragale & Di Costanzo, LLP in Rye and Yorktown Heights. He is an attorney and accountant whose main area of practice is elder law and special needs planning. Di Costanzo can be reached at 914-925-1010 or at smd@mfd-law.com. You may also visit www.plantodayfortomorrow.com.
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