On December 15, 2020, Governor Andrew Cuomo signed a bill into law with the intent of simplifying New York’s Power of Attorney law. This new law goes into effect on June 13, 2021.
What is a Power of Attorney?
A Power of Attorney is a legal document that allows an individual (the principal) to name a person (the agent) who will have the authority to handle certain or all financial matters on that individual’s behalf. This authority can be made so it is effective immediately and last through the principal’s incapacity, or it can be made to go into effect if/when the principal becomes incapacitated. If an individual becomes incapacitated (whether by accident, illness, or advancing age), nobody will have the legal authority to make decisions over or access that person’s financial assets unless the principal appointed an agent through a duly executed and proper power of attorney.
A Power of Attorney does not give the chosen agent the power to make health care decisions on the individual’s behalf. In order to grant that authority, an individual must also sign a Health Care Proxy.
What will change with the new law?
Timeline for acceptance/refusal. Under the new law, the biggest change is the creation of a system for acceptance/refusal of the Power of Attorney. Previously, there was no recourse if an institution refused to accept a valid Power of Attorney. Under the new rules, a 10-day limit is imposed by which the Power of Attorney must be accepted or rejected in writing. Further, if a third-party ultimately refuses to accept, a special proceeding can be brought to require the refusing party to accept a valid Power of Attorney.
Gifts. Under the prior law, in order to make gifts over $500, the principal needed to sign an additional document called a Statutory Gifts Rider at the same time the Power of Attorney was signed. Gifting authority is often important for estate planning, either for Medicaid planning for long term care or for estate tax planning. This separate document is no longer needed. However, in order to make gifts over $5,000, gifting transactions must be authorized in the “Modifications” section of the new Power of Attorney.
New witness requirement. Under the new rules, in addition to requiring the principal’s signature to be notarized, a Power of Attorney must be executed in front of two witnesses.
What about prior Powers of Attorney?
The new statute provides that a Power of Attorney that was valid under the law prior to June 13, 2021 should still be valid after that date. Despite this provision in the statute and the intent of the legislature in this regard, there is some ambiguity in the statute that may cause financial institutions to try to reject existing Powers of Attorney. In our experience with financial institutions, they are reluctant to accept Powers of Attorney since a forged Power of Attorney can be used to perpetrate fraud. Due to this reluctance, we recommend that clients contact us to review their current Powers of Attorney and update them where needed.
Please reach out to the Trusts and Estates team at Hollis Laidlaw & Simon for a complimentary consultation.