New York’s New Power of Attorney Law: An Update

New York’s New Power of Attorney Law: An Update

8.4.2023

By David Goldfarb

It’s been two years since New York’s new power of attorney law went into effect, and it’s time for a look at how it is performing under changes that were based on a proposal by the New York State Bar Association. Legislation to amend the Power of Attorney law passed the New York State Assembly and Senate in 2020 and was delivered to Governor Andrew Cuomo, who signed it into law, effective June 13, 2021. The governor’s signing memo indicated there would be a chapter amendment that had been agreed on by the governor and the Legislature. The chapter amendment was signed by the governor on March 24, 2021.[1]

The major changes to the New York Power of Attorney law included the following:

• A statutory short form Power of Attorney requires wording that “substantially conforms” to the wording in the statute rather than “exact wording”;
• The separately executed Statutory Gifts Rider was eliminated, and gifting provisions can now be included in the modifications section;
• A power of attorney can be signed by another person at the direction of the principal;
• All powers of attorney require two witnesses (one of whom can be the notary);
• There were changes to the construction sections of the statute;
• There is an acceptance and reliance timeline for third parties who are honoring or dishonoring a Power of Attorney; and
• There is a provision for damages and attorney fees for the unreasonable refusal to accept a valid Statutory Short Form Power of Attorney.

Grandfathering

The enactment provision of the new law did specifically provide “that any statutory short form Power of Attorney and any statutory gifts rider executed by a principal and valid at the time executed by such principal shall remain valid . . . .”[2] This was intended to indicate that grandfathered powers of attorney only had to be executed by the principal (something that was left ambiguous in the prior 2008 and 2010 legislation).

However, the statute, both previously and as amended, provided that to be “valid” the power of attorney must “be signed and dated by any agent acting on behalf of the principal with the signature of the agent duly acknowledged.”[3] This left some ambiguity given the statute’s definition of a “valid” power of attorney that would be grandfathered.

The statute has now been amended by adding a new subdivision 5 to N.Y. General Obligations Law Section 5-1501B, which clarifies that powers of attorney need only to have been executed by the principal and conform to the law in effect at the time executed by such principal to remain valid and enforceable under the new law, even if signed by the agents after the effective date of the new law.[4]

Witnessing Provisions

All powers of attorney must now be witnessed by two persons who are not named as either agents or as permissible recipients of gifts. It is done in the same manner as witnesses to a will. The statute cross-references N.Y. Estates, Powers and Trusts Law (EPTL) 3-2.1(a)(2), and the notary may be one of the witnesses.^[5] EPTL 3-2.1(a)(2) provides that the signature be done in the presence of each of the attesting witnesses or be acknowledged by the testator to each of the witnesses to have been affixed by the testator or by his direction. Therefore, the principal may either sign in the presence of or acknowledge his or her signature to each attesting witness separately.

Regarding forms signed after the effective date of the new law, although the definition of “substantially conforms” includes utilizing language from a previous statute,[6] after June 13, 2022, using an old form would create an invalid power of attorney, since it would not conform to the currently required two-witness provision. However, if there were a notary and a second witness present when the power of attorney was signed, it may be possible for this omission to be corrected, since the other provisions of EPTL 3-2.1 are not cross-referenced, so the requirements that the witnesses sign within 30 days does not apply.[7] Similarly, the requirement that witnesses affix their residence addresses does not apply.

Construction Sections

A Statutory Short Form Power of Attorney is a “short form” because by initialing provisions in section (f) of the form, the principal is referencing the provisions as defined in GOL Sections 5-1502A through 5-1502N.[8] Therefore, all those powers do not have to be separately spelled out in the power of attorney form. However, a number of transactions are excluded unless the authority is expressly stated in the modification section. These are issues frequently raised by third parties when not honoring a power of attorney.

In GOL Section5-1502D, regarding banking transactions: (a) with respect to joint accounts existing at the creation of the agency, the authority does not include the power to change the title of the account by the addition of a new joint tenant or the deletion of an existing joint tenant, unless the authority to make such changes is expressly stated; and (b) with respect to Totten trust accounts existing at the creation of the agency, the authority does not include the power to add, delete or otherwise change the designation of beneficiaries in effect for any such accounts, unless the authority to make such additions, deletions or changes is expressly stated.

Many banks do not allow checks that require two or more signatures. This created problems for powers of attorney who had two or more agents that were required to act together. To solve this problem the law now provides that if a power of attorney requires that two or more agents act together as co-agents, one or more agents may delegate to the co-agent the authority to conduct banking transactions if the principal initialed subject (o) in the grant of authority provisions of paragraph (f).[9]

In GOL Section 5-1502F, with respect to life insurance contracts existing at the creation of the agency, the authority granted does not include the power to add, delete or otherwise change the designation of beneficiaries in effect for any such contract, unless the authority to make such additions, deletions or changes is stated otherwise in the modifications section.

In GOL Section 5-1502K, matters related to health care were significantly changed to make it clear that the purpose of the section is to be able to receive information to handle benefit entitlements and payment obligations. The authority granted is limited to health care financial matters and does not include authorization for the agent to make health care decisions for the principal that would still require a health care proxy. Meeting the principal’s financial obligations and paying health care bills would be done in conjunction with authority granted in other sections relating to banking transactions, bond, share and commodity transactions, and insurance transactions.

GOL Sec tion 5-1502L, relating to retirement benefit transactions, does not include the authority to add, delete, or otherwise change the designation of beneficiaries in effect for any retirement benefit or plan, unless the authority to make such additions, deletions or changes is expressly stated otherwise in the modifications section.

Most of the above additions can be added to the modification section. However, there are certain limitations. As noted above, a power of attorney cannot be used to handle health care decisions. In New York, health care decisions are delegated to an agent by a health care proxy. An agent also cannot swear to the truth of a statement by signing an affidavit in the name of a principal.[10]

Gifting

The provision for a Statutory Gifts Rider with its separate execution requirement has been repealed.[11] Gifting provisions are now to be included in the modification section of the Statutory Short Form Power of Attorney. You must still initial (g) CERTAIN GIFT TRANSACTIONS if you want to include gifting provisions in the modification section.

Since GOL Section 5-1514 has been repealed, it is not required to list in the modification section the manner of making gifts. Prior to the 2009 amendment of the power of attorney law, there was no requirement to specify how gifts were to be made.[12] However, GOL Section 5-1514(4), added in 2009, had provided: “An agent may not: (a) exercise any authority described in subdivision two or three of this section unless such authority is expressly granted in a statutory gifts rider to a statutory short form power of attorney or in a non-statutory power of attorney . . . .” The referenced Section 5-1514 subdivisions (2) and (3) had listed ways gifts could be made. With the repeal of § 5-1514, the requirement no longer exists. However, some items are required to be “expressly stated” by the construction sections of the new statute. These were discussed above.

Even though including provisions in the modifications section listing how gifts can be made is no longer expressly required, for purposes of clarity, it is still recommended.

Case law regarding the prior power of attorney law and gifting remains in effect. Basically, gifts of the principal’s assets must be in the best interest of the principal.[13] Gifts made by an agent to himself or herself are valid if authorized by a specific provision in a power of attorney (now in the modification section) and the gifts are made in the principal’s best interest. There is no presumption of impropriety, and the burden of proof is on the person challenging the gift.[14] A gifting provision is not necessary where there is clear and convincing evidence that a transfer was compensation for services.[15]

Enforcement of a Power of Attorney

Perhaps the most significant change to the power of attorney law was that if a special proceeding as authorized by GOL Section 5-1510 is brought to compel a third party to honor the Statutory Short Form Power of Attorney, 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.[16] No third party can refuse, without reasonable cause, to honor a statutory short form power of attorney properly executed in accordance with the provisions of GOL Section 5-1501B or a Statutory Short Form Power of Attorney properly executed in accordance with the laws in effect at the time of its execution.[17] This provision effectively grandfathers, for purposes of enforcement, any properly executed Statutory Short Form Power of Attorney under the previous statutes.

There are not yet any reported cases regarding damages or attorney fees in the enforcement of a power of attorney. However, many attorneys report that problems with acceptance of the power of attorney statutory short form persist with banks and other financial institutions. After passage of the law, at the request of the New York Bankers Association, there was a six-month “learning period” before the law took effect to allow banks and other organizations to train their staff on the new law. It is not apparent that any such training has taken place.

Informal feedback indicates that bringing to the bank’s or other third party’s attention the relevant legislation and the financial institution’s obligations under the law either verbally or in writing, including the potential for damages and attorney fees, often solves the problem.

Conclusion

Attorneys and others both preparing and accepting New York powers of attorney need to be aware of several new facts: If an outdated form is used the power of attorney will be invalid, since it will not have the two required witnesses. The modification section of the power of attorney form must be carefully drafted if the ability to make gifts or transfer the principal’s property is to be included. The damages and attorney fee provisions apply to all existing valid Statutory Short Form Powers of Attorney.

The new form will make it easier for lay persons executing a power of attorney to understand what they are signing. The drafters, however, must still understand the law and all its nuances including what is in the construction sections of the statute. Banks and financial institutions will have to adopt procedures for the acceptance or rejection of a power of attorney and train their staffs in order to avoid liability.

David Goldfarb, of counsel to the Grimaldi Yeung Law Group, was formerly the managing partner of Goldfarb Abrandt & Salzman. He was the co-author of “New York Elder Law” (Lexis/Matthew Bender) from 1999 to 2019, is a former chair of the Elder Law and Special Needs Section and was a member of the NYSBA Task Force on the Power of Attorney that helped draft the changes that were signed into law in 2020 and 2021. He is also a member of the NYSBA Task Force on Notarizatio 

[1] 2021 N.Y. Laws ch. 84.

[2] 2020 N.Y. Laws ch. 323 §19.

[3] GOL § 5-1501B(1)(c).

[4] 2022 N.Y. Laws ch. 784.

[5] GOL § 5-1501B(1)(b).

[6] GOL § 5-1501(2)(n)(iii).

[7] EPTL 3-2.1(a)(4).

[8] GOL § 5-1513(f).

[9] GOL § 5-1502D(18).

[10] U.S. Bank N.A. v. Allen, 63 Misc. 3d 1207(A) (Sup. Ct., Kings Co. 2019).

[11] GOL § 5-1514 (repealed).

[12] The 2009 amendments to the General Obligations Law, which specifically require written authorization in a Power of Attorney to make gifts do not apply to pre-2009 Powers of Attorney. In re Tuzzolino, 208 A.D. 3d 664 (2d Dep’t 2022).

[13] In re Ferrara, 7 N.Y.3d 244 (2006), appeal after remand remitted, 50 A.D.3d 899 (2d Dep’t 2008), appeal denied, 11 N.Y.3d 712 (2008).

[14] In re Ferrara, 7 N.Y.3d 244.

[15] Alsante v. Maika, 206 A.D.3d 1563 (4th Dep’t 2022), aff’d, 2023 N.Y. Slip Op. (April 25, 2023) (also holding where parties are related the presumption (if any) that services were out of love and affection can be rebutted by clear, convincing and satisfactory evidence that there was an agreement that the services would be compensated).

[16] GOL § 5-1504(4)(b).

[17] GOL § 5-1504(2).