The Long-Awaited Modifications to the Statutory Short Form Power of Attorney Have Been Enacted

The Long-Awaited Modifications to the Statutory Short Form Power of Attorney Have Been Enacted

1.22.2021

By Anthony J. Enea

The changes to the New York Statutory Short Form Power of Attorney (POA) are long overdue. The last revision occurred nearly 10 years ago, and the present POA form has been regarded as unduly complicated and burdensome to both prepare and execute (especially for seniors).

The following is a summary of the major modifications, along with a subsequent review of each revision.

Logically, the revisions to the New York Statutory Short Form POA and certain provisions of Sections 5-1501 through 5-1514 of the General Obligations Law (GOL), which will be effective for all POAs signed on or after June 13, 2021,^[1] are intended to simplify the current POA as it has been deemed “prone to improper execution.”^[2] Senate Bill Section 3923, which was passed on December 15, 2020, states the objectives of the modifications to be the following:

1. To permit substantially compliant language, as requiring exact wording is an undue burden;
2. To provide “safe harbor” provisions for those who in good faith accept an acknowledged POA without actual knowledge that the signature is not genuine;
3. To permit sanctions against any individual or entity (banks, financial institutions, etc.) that unreasonably refuses to accept a valid POA;
4. To allow a person to sign at the direction of the principal, if the principal is physically unable to sign;
5. To permit the agent to make gifts of up to $5,000 per year (increased from the previous limit of $500) without requiring a modification to the form;
6. To remove all of the provisions that apply to the Statutory Gifts Rider (SGR);
7. To clarify the obligations of the agent under the POA to keep records and receipts; and
8. To clarify the agent’s authority related to financial matters concerning the principal’s health care.^[3]

The following constitutes a summary of the major specific statutory revisions made to the POA statute in New York:

A. Revisions to Section 5-1501 of the GOL

1. Section 5-1501(j) has been revised so that the definition of a POA includes both the Statutory Short Form POA and non-statutory POAs;^[4]
2. Section 5-1501(n) has been revised to delete the definition of the SGR.^[5] Under the newly modified form, all gifting in excess of the permitted $5,000 per year would need to be delineated in the “Modifications Section” of the POA.^[6]
3. Section 5-1501(o) (now 5-1501(n)) changes the requirement of “exact wording” to “substantially conforms” and provides that substantial conformity can occur notwithstanding an insignificant mistake in wording, spelling, punctuation, formatting, or the use of bold or italic type, or the presence or absence of a particular clause.^[7] Previously, the “exact wording” provision required that the language in the POA (with the exception of the Modifications Section and the gifting powers delineated in the SGR) be identical to that in the Statutory Short Form including all typographical errors. It was an absurd requirement. This provision also allows optional sections of the form (such as the “Designation of Monitor(s)” and “Compensation of Agent”) to be deleted and replaced with the words “Intentionally Omitted.”^[8] It is my experience that clients generally do not want to appoint individuals to be “monitors” for their spouse and/or children (who are normally the agents) nor have they been inclined to compensate their children or other family members for acting as their agents.

B. Revisions to Section 5-1501(B) of the GOL

1. Section 5-1501(b) allows the POA to now be signed, initialed and dated by a principal with the mental capacity to do so, or in the name of a principal who has the mental capacity to do so by another person in the presence of and at the direction of the principal.^[9] This revision acknowledges that a principal who is mentally competent and is not physically able to sign, initial and date the POA form should not be deprived of having a POA because of his or her physical infirmities. When a person signs at the direction of the principal, he or she must sign by writing or printing the principal’s name and printing and signing his or her name.^[10] The signatures of the principal, the person signing on his or her behalf, and the agent must all be acknowledged. While this change appears to be well-intended, it does open the door for possible issues, such as whether the principal, in fact, gave direction to another person to sign on his or her behalf. In order to address these issues and protect the elderly and disabled population from fraud and abuse, Governor Cuomo has reached an agreement with the New York Legislature to make several amendments in early 2021, including requiring two disinterested witnesses to sign the POA form, one of whom may also be the notary public notarizing said form.^[11]
2. Section 5-1501(d) changes the requirement of “exact wording” within the “Caution to the Principal” in 5-1513(a) and “Important Information for the Agent” in 5-1513(n) to “substantially conforms” and allows for “insubstantial variation” in the wording of those sections.^[12]

C. Revisions to Sections 5-1502A, 5-1502(B), 5-1502(C), 5-1502(D), 5-1502(F), 5-1502(I), 5-1503, 5-1505, and 5-1514 of the GOL

These revisions remove all provisions that apply to the SGR.^[13] As is stated below, and as per the revisions to Section 5-1513, all gifting authority over and above the allowable $5,000 per annum, including the agents’ authority to gift to themselves, must be stated in the Modifications Section of the POA. ^[14]

D. Revisions to Section 5-1502(D) of the GOL

This revision provides that changes to joint bank accounts (e.g., adding a new joint tenant or deleting an existing joint tenant) and changes to beneficiary designations in Totten trusts are not authorized by the POA unless such changes are expressly stated in the Modifications Section.^[15] Additionally, if agents under a POA are required to act together, one agent 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) of the form.^[16]

E. Revisions to Section 5-1502 (I) of the GOL

This revision allows gifts by the agent of up to $5,000 (as opposed to the previous limit of $500) per calendar year to individuals and charitable organizations, provided that those gifts were customarily made by the principal prior to the creation of the agency.^[17]

F. Revisions to Section 5-1502(K) of the GOL

This modification pertains to the granting of authority to the agent to deal with financial matters relating to the principal’s health care: It does not grant the agent the authority to make medical and/or health care decisions for the principal; however, the agent is now permitted to take responsibility for the financial matters that are associated with the principal’s health care, including, but not limited to, benefit entitlements and payment obligations.^[18] Additionally, notwithstanding any law to the contrary, the agent is entitled to receive from any health care provider and health plan information that is relevant to the legitimacy and accuracy of the health care charges.^[19] As part of that entitlement, the agent is also able to receive “protected health information” as defined by federal and state law.^[20] Finally, the agent is entitled to receive information about the health care benefits to which the principal is entitled in order to meet the principal’s financial obligations and pay the bills due and owing.^[21]

This modification specifically expands the agent’s role vis-à-vis the principal’s financial rights and obligations relevant to health care matters.

G. Revisions to Section 5-1502L of the GOL

This modification specifies that changes to designation of beneficiaries are not authorized by the POA unless expressly stated within the Modifications Section.^[22]

H. Revisions to Section 5-1504 of the GOL

For many years our clients have endured endless obstacles and delays when attempting to utilize a properly executed and valid POA with a bank or financial institution. The excuses given for refusing to recognize the POA ran the gamut from “It’s not on our own form” to “We don’t allow POAs with multiple agents.” Sadly, there has been an endless and varied parade of excuses to reject the POA.

In reality, these types of excuses were poorly disguised subterfuges for their true concern – that if they were relying on a POA that was not properly executed or a product of fraud, they would expose themselves to potential liability if they allowed the agent to act thereunder.

In summary, the major revisions to Section 5-1504 provide banks, financial institutions and others relying upon the POA with safe harbor provisions that are beneficial for all parties involved.^[23] The key aspects of those provisions are as follows:

1. Section 5-1504(1) allows a party to rely in good faith upon an acknowledged (and, following Governor Cuomo’s anticipated amendment, properly witnessed) POA and to request an agent’s certification and opinion of counsel.^[24] If an opinion of counsel is requested, the cost thereof is borne by the principal unless the request is made more than 10 business days after the POA is presented for acceptance.^[25]
2. Section 5-1504(2) allows as a reasonable cause for refusing to honor a POA, either the agent’s refusal of the party’s request that the agent provide a certification under the penalty of perjury of any factual matter concerning the principal, or the agent’s refusal of the party’s request to provide the opinion of counsel as to any matter of law concerning the POA if the person making the request provides in a writing or other record the reason for the request. ^[26]
3. Section 5-1504(3) allows a third party to reject the Statutory Short Form POA in a writing that sets forth the reasons for the rejection, allows for the proponent of the POA to respond, and allows for the third party to either honor the POA or provide a written rejection stating the reasons therefor.^[27]

The revisions to Section 5-1504(3)(a) provide that no later than the 10th business day after the presentation of an original or certified copy of the POA, the POA shall either be honored or rejected^[28] (with the reasons for the rejection being set forth in writing to the agent). If the third party rejects the POA, the agent must then respond to the rejection, after which the third party then has seven business days to finally honor or reject the POA.^[29] If the third party rejects the POA for a second time, as per Section 5-1510, the agent can then commence a special proceeding to have the Statutory Short Form POA honored.^[30] The court may award damages, including reasonable attorneys’ fees and costs, if the third party acted unreasonably in refusing to honor the POA or failed to provide a statement in a timely manner (subject to certain exceptions, as provided by Governor Cuomo’s anticipated amendment^[31]) or at all, setting forth the reasons^[32] for the refusal.

These revisions provide the third party that accepted the POA in good faith and without any actual knowledge that the POA was invalid or terminated, or that the agent was exceeding or improperly exercising his or her authority, with the requisite protection and safe harbor from any claims that could ensue against the third party as a result.

The revisions to Section 5-1504(4)(a) specifically provide that “once reasonably accepted, if a third party conducts a transaction in reliance upon a properly executed [S]tatutory [S]hort [F]orm Power of Attorney, the third party shall be held harmless from liability for the transaction.”^[33]

 I. Revisions to Section 5-1513 of the GOL

1. Section 5-1513(1) allows a Short Form Statutory POA that substantially conforms; it also allows any section indicated as “optional” that is not used to be omitted and replaced by the words “Intentionally Omitted.”^[34] This relates to the section above describing provisions that are relevant to Designation of Monitor(s) and Compensation for Agent.
2. Section 5-1513 (1)(b)(c) modifies the POA form so that if the principal wants his or her agents to act together, the principal must initial the provision that states “My agents must act together.”^[35] Additionally, the principal must specify whether he or she wishes for the successor agents to act together or separately. The principal’s failure to select either option will default to the requirement that the successor agents act together.^[36]

These revisions, in my opinion, may create confusion, as was the case in the first iteration of the POA form in 2010, insofar as they require initialing by the principal. It doesn’t make the election of the options any easier for the principal, especially a principal with physical infirmities. It would have been easier to just leave it so that, unless the principal indicates otherwise, the co-agents and successor co-agents must act together. It has always been my belief that requiring one’s agents to act together creates a built-in system of checks and balances against the potential abuse of the POA by one agent acting alone. With the advent of DocuSign, Federal Express, and email, having people sign documents who reside at opposite ends of the globe is no longer a monumental undertaking.

3. Section 5-1513(g), as revised, specifically provides that the authority to make gifts to the agent must be stated in the Modifications Section of the POA.^[37]

This is an excellent revision, as it completely eliminates the need for the SGR and the onerous description of the gifts and initialing of the gift provisions and the witnessing required. It was a veritable nightmare for seniors. Over the last 10 years I have seen numerous SGRs that were neither appropriately executed nor did they contain adequate descriptions of the gifting and transactions that were permitted.

4. Section 5-1513(j) allows for compensation to the agent to be specified in the Modifications Section of the POA.^[38]
5. Section 5-1513(n)(4) requires the agent to keep records and receipts of all transactions conducted.^[39]

In conclusion, the revisions to the Statutory Short Form POA are in many ways positive. What remains to be seen is whether the utilization and execution of the form will be easier for the practicing bar to draft, and our clients to execute, and whether the bar as a whole will understand and implement the modifications to their full extent. Without the existence of the SGR, there remains the possibility that, rather than delineating specific and significant gifting powers in the Modifications Section, attorneys will totally ignore gifting powers and the opportunity to delineate them altogether. This would limit the agent to gifting the maximum of $5,000 per year, which could be detrimental to seniors and others who may need their assets gifted for estate tax and elder law planning purposes.

Anthony J. Enea is a member of Enea, Scanlan and Sirignano of White Plains and Somers, New York. He focuses his practice on wills, trusts and estates and elder law. Enea is the past chair of the Elder Law and Special Needs Section and the current chair of the 50+ Section of NYSBA. He is the past president and founding member of the New York Chapter of the National Academy of Elder Law Attorneys (NAELA). Enea also serves as president of the Westchester County Bar Foundation and is a former president of the Westchester County Bar Association. He acknowledges firm associate Stella King for her research and assistance in the preparation of this article.

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[1]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 19 (N.Y. 2020).

[2]. Sponsor’s Mem, The New York State Senate (2020, December 15). Summary: S.B. S3923A: https://www.nysenate.gov/legislation/bills/2019/s3923.

[3]. Id.

[4]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 1 (N.Y. 2020); see also Sponsor’s Mem, The New York State Senate (2020, December 15). Summary: S.B. S3923A: https://www.nysenate.gov/legislation/bills/2019/s3923.

[5]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. §§ 2-3 (N.Y. 2020); see also Sponsor’s Mem, The New York State Senate (2020, December 15). Summary: S.B. S3923A: https://www.nysenate.gov/legislation/bills/2019/s3923.

[6]. Governor’s Approval Memo, Bill Jacket, L 2020, Chapter 323 at 32.

[7]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 3 (N.Y. 2020)

[8]. Id.

[9]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 4 (N.Y. 2020)

[10]. Id.

[11]. Governor’s Approval Memo, Bill Jacket, L 2020, Chapter 323 at 32.

[12]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 4(1)(d) (N.Y. 2020); see also Sponsor’s Mem, The New York State Senate (2020, December 15). Summary: S.B. S3923A: https://www.nysenate.gov/legislation/bills/2019/s3923.

[13]. Sponsor’s Mem, The New York State Senate (2020, December 15). Summary: S.B. S3923A: https://www.nysenate.gov/legislation/bills/2019/s3923; see also S.B. S3923A, 2019-2020 Leg., Reg. Sess. §§ 2, 4-8, 10, 12-15.

[14]. Governor’s Approval Memo, Bill Jacket, L 2020, Chapter 323 at 32.

[15]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 8 (N.Y. 2020)

[16]. Id. at § 8-a.

[17]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 10 (N.Y. 2020)

[18]. Id. at § 11.

[19]. Id.

[20]. Id.

[21]. Id.

[22]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 10 (N.Y. 2020) at § 12.

[23]. Id. at § 14.

[24]. Id.

[25]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 14 (N.Y. 2020) at § 14.

[26]. Id.

[27]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 14 (N.Y. 2020) at § 14.

[28]. Id.

[29]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 14 (N.Y. 2020) at § 14.

[30]. Id.; see also § 16.

[31]. Governor’s Approval Memo, Bill Jacket, L 2020, Chapter 323 at 32.

[32]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 14 (N.Y. 2020) at § 14.

[33]. Id.

[34]. Id. at § 17.

[35]. Id.

[36]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 14 (N.Y. 2020) at § 17.

[37]. Id.; see also Governor’s Approval Memo, Bill Jacket, L 2020, Chapter 323 at 32.

[38]. S.B. S3923A, 2019-2020 Leg., Reg. Sess. § 14 (N.Y. 2020) at § 17.

[39]. Id.