Recent changes to the New York Power of Attorney

Recent changes to the New York Power of Attorney

August 02, 2021

Dear Clients and Friends,

As many of you may know, a Power of Attorney is a legal document in which a principal (hereinafter “the Principal”) gives a trusted agent, sometimes known as the attorney-in-fact (hereinafter “the Agent”), the power to make certain decisions on her/his behalf.  The power is typically general in nature, but it can be limited to a particular activity, such as a real estate closing.  Agents, under the new law, have the ability to make a vast array of financial and legal decisions for the Principal, including, but not limited to, the creation, termination and/or funding of a trust, a transfer of assets, the designation of beneficiaries, and the exercise of a power of appointment. 

                A Power of Attorney is frequently used in estate planning and is commonly prepared by an attorney drafting wills for a Principal.  Consequently, it is important to understand some of the key changes and additions of the new law.  Effective June 13, 2021, the statutory short form of the power of attorney has been simplified and incorporates provisions to minimize rejection from financial institutions.  Some of the significant changes include:

  • Permission of substantial conformity: The previous Power of Attorney form was complex, cumbersome, and required strict adherence to the exact language of the statutes.  The new law provides that if the statutory short form of a power of attorney “substantially conforms” to the statue, it will be deemed acceptable, thus permitting for minor changes or errors in drafting.  This will ostensibly result in greater acceptance by third parties, such as banks or other financial institutions.  

  • Elimination of the Statutory Gifts Rider: Previously, a power of attorney had to list gift giving authority in a separate document, called the Statutory Gifts Rider, contributing to the complexity.  This rider is now eliminated and gift giving authority is included under the so-called “Modifications” section of the form.  At Navis Wealth, we strongly recommend adding additional and detailed powers to the Modification section.  By thoroughly explaining gifting, Medicaid planning, elder planning or wealth transfer planning, Agents should be able to exercise their powers with greater ease. 

  • Health Care Financial Matters: Although they cannot make decisions concerning medical treatment of the Principal  (a Health Care Proxy is advisable for such a purpose), an Agent can handle the financial matters surrounding health care for the Principal. 

  • Ten Day Rule: Within 10 business days after the presentation of the new statutory short form power of attorney, a third party is required to either honor, reject, or request an affidavit to accompany the power of attorney.  If the third party rejects the form, it must be done in writing to the Agent and Principal and the reason for the rejection must be provided.  Under the new statute, a third party cannot refuse to honor a statutory short form without reasonable cause. If it does, it will be liable for penalties and legal fees incurred by the Agent or Principal. Importantly, a third party that accepts a statutory short form is now held harmless from liability for the transaction.  These provisions collectively should result in much greater acceptance and ease of use of powers of attorney.

  • Third Party Signing for the Principal: The new statute accommodates Principals suffering from a mental or physical incapacity, so that she/he may direct another person to sign the power of attorney short form on her/his behalf.  For example, a Principal of sound mind but unable to hold a pen can now instruct a third party to execute the form.  There is a specific procedure that must be followed to do this. This provision simplifies what was a burden for the disabled community. 

Although all valid Powers of Attorney executed before June 13, 2021, are grandfathered, Principals should review their documents.  In many cases, the new form may be advisable.  If you have any questions or would like us to review your Power of Attorney, please do not hesitate to ask. You may wish to share this information with your family and friends.

*Letizia Carlisto is a Wealth Advisor Associate at Navis Wealth Management, LLC. David Bruckman is a Senior Consultant at Navis Wealth Management concentrating in Wealth Transfer and Risk Management. Copyright Navis Wealth Management, LLC, August 2021. All Rights Reserved.

Download PDF