New York State recently changed the law governing the preparation, execution, and use of a power of attorney (POA). The new law aims to simplify the previously cumbersome requirements that could result in an invalid document due to immaterial or typographical errors, such as misplaced punctuation. In addition to updating how the POA form is drafted, the new law updates rules about gifting, how the form must be signed, and the use of the POA.
In a break from the previous law, rather than requiring the exact statutory wording, a POA must simply “substantially conform” to the statute. Insignificant mistakes in wording or punctuation, use of language that is essentially the same, or the omission of optional language regarding compensation or the use of a monitor will no longer invalidate the document.
Formerly, if the principal opted to allow their agent to make annual gifts in excess of $500, a second complicated form—a statutory gifts rider—was required. The new law eliminates the use of this additional form. In addition to increasing the annual gift threshold to $5,000, the principal may add specific directions about gifts in excess of this amount in the modifications section of the POA.
One major concern about the POA is accessibility for people with physical disabilities. Unlike almost every other legal document, existing law does not permit an individual to direct another person to sign the form on their behalf. The new law will allow individuals with disabilities to direct someone to sign the document on their behalf so long as it is done in the presence of the directing principal. The new law requires that the principal’s signature be both acknowledged before a notary public and two disinterested witnesses.
There are several ways the law has been updated to achieve the goal of making the executed POA easier to use.
A recurring problem for agents attempting to use the POA is their rejection by various institutions. The new law addresses this concern in multiple ways. First, new updates provide safe harbor protections for an institution accepting a POA. Absent any knowledge to the contrary, the principal’s acknowledged and witnessed signature is presumed to be genuine. The POA can be relied upon in good faith without subjecting the accepting party to liability. Second, if a POA is rejected, reasonable cause for the rejection must be provided in writing and followed by an opportunity for each party to address the issues raised. Ultimately, if a POA is improperly rejected, the agent may pursue a legal proceeding and recover sanctions.
Another common problem arose from agents being unable to adequately review medical bills of the principal. Agents will be specifically authorized to receive information from health care providers and health plans—even if it is defined as protected health information—in order to evaluate health care charges and pay the principal’s health care costs. Note that this change does not permit an agent to make health care decisions on behalf of the principal—a separate health care proxy is still required.
The new law takes effect on June 13, 2021. Existing valid POAs will continue to be effective. However, it is worth reviewing those previously executed POAs to confirm that they still serve the principal’s current wishes.
If you have any questions regarding the content of this alert, please contact Marcy Robinson Dembs, partner, at mdembs@barclaydamon.com; Meaghan Murphy, counsel, at memurphy@barclaydamon.com; or another member of the firm’s Trusts & Estates Practice Area.