Back in December 2020, Governor Andrew Cuomo signed a new bill into law that made many changes to New York’s current power of attorney laws. This new piece of legislation has been hailed as an improvement from the current legislation. The new bill simplifies the existing statutory power of attorney form and provides new rules on enforceability of the document. Overall, this is a win for consumers and a way to help make the power of attorney document more user-friendly.
What is a Power of Attorney?
Before I dive into the new changes, let’s briefly recap what a power of attorney is and how it can be used to help protect your and your finances. A power of attorney is a document where you (also known as the principal) give the power to another person (also known as the attorney-in-fact or agent) to act on your behalf to make a variety of financial decisions on your behalf. This document is essential in the event that you can longer speak for yourself because of an illness or disability.
Current New York state law outlines a specific form with exact wording of what an individual’s power of attorney document should say. The current form is cumbersome and not easy to use. In practice, it has been found to be very easy for a layperson or an attorney to make simple mistakes when drafting or executing it that will affect the validity of the document. Banks and financial institutions would routinely reject these documents for minor or harmless errors which would render it useless.
The new law, which goes into effect on June 13, 2021, makes the rejection of the document less likely because it will no longer require individuals to have documents with the exact wording of the statutory form. Instead, it will allow for similar language to be used in the document that conforms to the statute. This comes as a relief as the new laws will make it easier to draft and use a power of attorney.
The new law also introduces changes to the signing requirements, which is important for those with disabilities or who cannot physically sign a document. Now, individuals will be able to direct others to sign on their behalf if there are two witnesses present. This new change will make it easier for many to sign a power of attorney. This change will help individuals who are in facilities like nursing homes or the hospital or have limited access to the outside world.
Another major change is the removal of the Statutory Gift Rider, which was introduced in the last round of changes to the power of attorney law. This Rider was an addendum to the power of attorney that a person could sign which would allow their agent to make gifts over $500. This rider was crucial for Medicaid and estate planning. Without this modification, agents were often limited in what they could do to preserve and protect assets under the power of attorney. While the new form will still have to be modified to give the agent the ability to make gifts, you no longer have to have a second form as part of your document.
One of the biggest downfalls with the current power of attorney law is that there are no penalties assessed against a third party that does not accept the power of attorney. Often times, banks and financial institutions unreasonably reject these documents for fear of being liable on a power of attorney that was not valid or fraudulently procured. The new changes addressed these issues. First, banks are not liable if they reasonably relied on a validly executed power of attorney. Second, if the bank refuses to accept a valid power of attorney, both the principal and the agent can now sue the bank for damages AND attorney’s fees. These changes will hopefully lead to less of a hassle when trying to use a power of attorney.
Estate planning and elder law attorneys have been advocating for these changes for a long time. We considered this new legislation a victory for the clients that we serve. A power of attorney is one of the most important documents that you can have in place to protect yourself in the event of an unexpected illness or unavailability. This document, along with an advance directive, is an integral part of any estate plan and should be considered no matter your age or health status.
If you are looking to learn more about power of attorneys and estate planning documents that you should have in place for yourself, we invite you to contact us for a consultation to discuss how a plan can protect you and your loved ones.