Laws governing powers of attorney vary by state, and New York recently updated its POA laws. Here's what you need to know.
Powers of attorney can be complicated, given each state has its own set of laws, in addition to the fact there are so many different types of powers of attorney to begin with.
New York has its own unique requirements, and some of those requirements recently changed after new legislation affecting powers of attorney was signed into law in December 2020.
If you’re looking to set up a power of attorney in New York, it’s crucial that you know the basics and familiarize yourself with recent changes to the legislation. We’ve outlined below the basics of what a power of attorney is, and five of the key changes to POA laws in New York.
A power of attorney agreement gives one person (the agent or “attorney-in-fact”) the legal authority to act on behalf of another (known as the principal).
Power of attorney agreements, often referred to as POAs, have multiple uses – you can appoint someone to manage your finances, healthcare, or even just your general affairs. POAs are often used to help manage the affairs of elderly or incapacitated people who can no longer make decisions on their own.
To learn more about the types of powers of attorney in-depth, check out our article here.
Powers of attorney are created under state laws, so the forms differ by state. The New York statutory short form must be completed to create a power of attorney in New York.
This form creates a durable power of attorney that’s effective immediately, and it can also be made into a Springing POA by specifying it will go into effect only upon your incapacitation.
In general, POAs in New York must meet the following basic requirements:
Additionally, medical powers of attorney are known as “healthcare proxies” in New York, and they require their own form created by the New York legislature.
Healthcare proxies have different requirements, as they must be signed and dated by the principal, and two adult witnesses who watched the principal sign must also sign.
In December 2020, former Governor Andrew Cuomo signed new changes on New York powers of attorney into law. These changes took effect in June 2021.
These changes were made to simplify the state’s power of attorney form, as the New York State Bar Association had previously said the POA form was too complex and difficult for individuals to use.
There are five key changes to know about the New York POA law:
Prior to the recent law change, a document called the “statutory gifts rider” had to be executed in order to allow an agent to give gifts over $500. The statutory gifts rider form – or SGR form – was required to be completed at the same time as the actual POA forms, but it had its own set of requirements.
The government decided to eliminate the SGR as part of the recent legislative changes because it was a confusing part of the power of attorney process for many people. With this new change, agents can also now gift up to $5,000 annually without additional permission from the principal.
Should the principal want to allow the agent to gift over $5,000, the principal can now grant additional gifting powers to the agent within the actual power of attorney (in the modifications section) without the need for a separate SGR form.
New York law previously required power of attorney forms to be written with strict adherence to the wording of the form provided in the state statute, meaning a POA could be invalidated due to trivial errors like spelling mistakes, punctuation errors, or formatting issues.
This had severe consequences when a POA was invalidated when the principal was incapacitated and could not correct the errors within their POA. In light of the law change, the forms must now just substantially conform to the statute, meaning insignificant errors will no longer invalidate an entire power of attorney.
The new legislation aims to deter third-party institutions from unreasonably refusing to accept an agent’s POA authority.
If during a special proceeding a third party is found to have unreasonably rejected an agent’s authority, the court can order the third party to pay damages. The court was previously unable to sanction third parties when unreasonable rejection occurred.
If a third party relies on a power of attorney that is later found to be invalid, the third party is not liable under the new safe harbor exception that went into effect in June 2021.
As long as the principal’s signature was acknowledged and the third party had no knowledge of errors, meaning they did not know that the document was invalid or that the agent was abusing their authority, then the third party avoids liability.
This new law change is extremely important for people who are physically unable to sign a POA but still retain mental capacity.
Because allowing someone else to enter a POA on the principal’s behalf could lead to undue influence or fraud, the law change also comes with the requirement that two witnesses must be present when the signing occurs. These witnesses cannot be agents named in the POA, and they should not be permissible recipients of gifts.
While we’ve covered the key law changes here, the law reform included several other minor changes to the New York statutory short form to make it easier for clients and estate planning attorneys alike to navigate the system.
If you have other questions about the NY power of attorney rules, it may be worthwhile to speak with an estate planning lawyer to ensure your POA is properly executed.
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