Big Changes to the New York Statutory Short Form Power of Attorney
After a decade of inattention, the New York Statutory Short Form Power of Attorney (POA) has been revised. The old form was regarded as stringent, confusing, and burdensome. The first round of revisions resulted from Assembly Bill A05630A in late 2020. A second round of revisions came from Senate Bill S888 in early 2021. Both bills amended or repealed certain portions of Sections 5-1501 through 5-1514 of the General Obligations Law (GOL) and both bills became effective on June 13, 2021.
One of the major changes to the POA was the elimination of the exact wording requirement. Prior, the definition of “Statutory short form power of attorney” meant one that contained the exact wording of the form provided in the statute. This could lead to confusion and difficulty in executing a proper document. For example, one provision in the document states: “I wish to designate _______, whose address(es) is (are)_______, as monitor(s).” If there was only one address to list, could you use the word “address”, or did the exact wording requirement mean you had to still use “address(es)”? Likewise, could you use the word “is” or “are”, or did you need to use the literal “is (are)”? Now, instead of an exact wording requirement, the POA needs to substantially conform to the form provided in the statute. This provides some much-needed flexibility to the document.
Another major change to the POA was the elimination of the Statutory Gifts Rider (SGR). The SGR was a separate document that had to be executed at the same time as the POA and attached to the POA, in order to allow certain gifting transactions. Now, in its place, gifting authorization would be listed in the “Modifications” section of the POA.
A huge win for senior advocates is that the POA can now be executed by a person signing at the direction of and in the presence of the principal. The principal still needs capacity, but this new provision is helpful for a principal who is physically unable to sign the document. Another new execution requirement is that two witnesses are now needed. Those two witnesses cannot be agents named in the document, nor can they be permissible recipients of gifts. However, the person taking the acknowledgment may serve as one of the witnesses. The witness requirement was added at the behest of elder law practitioners and advocates, after they argued that allowing another to sign on the principal’s behalf could lead to fraud or undue influence.
After the POA is presented to a third party, they must honor the POA or reject it in writing within 10 days. If the agent replies to the third party’s rejection notice, then the third party has an additional 7 business days thereafter to either honor the POA or issue a final rejection letter. In the alternative, the third party could request that the agent execute an affidavit. Then, the third party must honor the POA within 7 business days after receipt of such affidavit.
A third party’s refusal to accept the new POA could result in financial penalties. If a special proceeding is initiated to compel the third party to honor the POA, “the court may award damages, including reasonable attorney’s fees and costs, if the court finds that the third party acted unreasonably in refusing to honor the agent’s authority under the statutory short form power of attorney.” (GOL 5-1504(4)(b)) Under the former law, the only remedy was injunctive relief. The new provisions that allow for penalties were added in part so that a principal and agent could more easily have confidence that a financial institution would honor the document and not require their own document to be executed.
To appease third parties who rely on a POA, a new safe harbor exception applies. If a third party relies on a POA and it is later deemed to be invalid, that third party is shielded from liability if the principal’s signature was duly acknowledged and the third party did not have actual knowledge that the document was invalid or that the agent was acting outside their authority.
There were other changes to the POA, as the law reform was plentiful. All of the new changes were timely implemented into the New York Statutory Short Form Power of Attorney in ElderCounsel’s document drafting system, ElderDocx®. ElderDocx® allows a user to draft many legal documents, including a Standalone Will; Revocable Living Trust; Trusts for Medicaid planning, Veterans’ benefits planning, special needs planning; financial and healthcare statutory and nonstatutory POAs; and much more. There are letters to clients, letters to government agencies, and letters to tax professionals. By answering intuitive questions in the software, the user can generate a legally-correct and tailored document for their client’s case.
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