A power of attorney is a legal document that permits the creator of the document (known as the “principal”) to name one or more agents (or “attorney(s)-in-fact”) to act for him or her. Specifically, the principal delegates the management of his or her legal and financial affairs to the agent(s).
A durable power of attorney takes effect immediately upon the agent’s acceptance of their authority. A springing power of attorney, on the other hand, goes into effect at a future time. It typically takes effect only when the principal becomes incapacitated, typically requiring medical certification.
The principal gives an agent the authority to make decisions on his or her behalf. This can include spending your money and selling or disposing of your property during your lifetime without your consent (or even knowledge).
When an agent exercises the authority given to him or her in the POA, he or she must act according to the instructions in the POA, or if there aren’t specific instructions, in the principal’s best interest.
There are several situations in which a person might want to have a fully-executed power of attorney. Most common is in the event you’re declared incompetent, and you are not able to act on your own behalf due to cognitive impairment often occasioned by Alzheimers or dementia. If you have a power of attorney completed prior to this event, it ensures that your personal affairs are overseen and looked after when you no longer have the ability to manage them on your own. This includes legal and financial matters.
It is absolutely critical that you not only have a power of attorney in place, but that it has the necessary provisions in place so that you can be adequately assisted by your agent should the need arise. If you do not provide your agent with the necessary authority, and you become incapacitated, your agent will need to commence a guardianship proceeding in court, a costly process, both emotionally and financially. A properly executed power of attorney can prevent this.
To assist you in these circumstances, an agent’s authority must be expansive, and often is recommended to include authority to make gifts, establish and/or fund trusts, etc. Under current New York law, the authority to do such planning requires that a statutory major gift rider with appropriate modifications is executed simultaneously with your power of attorney. On December 15, 2020, Governor Andrew Cuomo signed into law a bill significantly changing New York State’s power of attorney form.
These changes will go into effect on June 13, 2021. Generally speaking, Power of attorney instruments signed now, before the new law takes effect, will still be valid under the new law.
Don’t rely on the power of attorney that you may have done when you sold or bought your home. You should have it reviewed by an elder law attorney.
There are several other circumstances that may require a power of attorney. For example, a person serving in the military might sign a POA before deploying overseas so that another person such as their spouse can act on their behalf in certain scenarios. Those serving or working overseas might want a power of attorney so that their agent can assist with their affairs in the United States while they are abroad. For example, it might be well advised to give your spouse the authority to sign closing documents on your behalf for the purchase of a home in or around White Plains or Westchester.
Younger people who travel extensively or are in another state for college might want to have a valid POA so that someone can coordinate their affairs in their absence, particularly if they’re single and don’t have a spouse to serve in that role.
But the most common application of a POA in New York State is for the elderly or when a person faces a serious, long-term health crisis.
A standard durable statutory POA in the state of New York lets an agent pay your bills or act on your behalf of in a business or legal transaction. Read more about the types of POAs below.
The New York Statutory Short Form Power of Attorney allows a principal to decide the specific topics on which his or her agent has the authority to act on their behalf. This may include subjects such as:
The standard form in New York also permits a principal to basically say “all of the above” and grant “full and unqualified authority” to the agent to delegate any or all of those powers to any person(s) whom the agent chooses.
It’s not uncommon for banks and other financial institutions to create problems for a principal and his or her agent by insisting that they use their company’s specific power of attorney. Until recently, the banks could arguably impose this requirement on their customers. However, as we noted above, under the new NY POA law, banking institutions in New York, among others, will be obliged to accept a valid, duly executed POA, or face penalties for their unreasonable refusal to do so.
Note that an agent can’t make health care decisions for a principal with this type of POA. You have to draft a Power of Attorney for Medical Decisions, also known as a “Health Care Proxy” to do this. Read more below.
An incapacitated principal’s medical needs are addressed by a health care proxy form. Some people incorrectly believe that one power of attorney will cover all situations. However, there’s a specific legal document that’s needed to grant an agent the authority to make healthcare and medical decisions on your behalf. This is a health care proxy.
A New York medical power of attorney form or “health care proxy” allows an agent to make critical medical decisions on your behalf if you (the principal) are unable to make these types of decisions for yourself. A durable POA takes effect immediately upon execution. A health care proxy only takes effect when the principal is incapacitated.
For example, your doctor may suggest some type of life-sustaining treatment or procedure for you when you’re in a coma or otherwise unable to understand the situation and make a decision on how to proceed. By executing a health care proxy, you give your agent the authority to discuss your health situation and your healthcare options with doctors and decide what to do. With a health care proxy, these important decisions are not left to strangers or the courts to decide, but will made only by those who you designate.
Again, in appointing a health care agent, you can make certain that your physicians and health care providers follow your wishes for medical treatment. In addition, your agent then has the ability to monitor and decide how your wishes apply if your medical condition changes. As a result, hospitals, physicians, nurses, and other healthcare professionals must follow your agent’s decisions as if they were your own.
Working with an experienced estate planning attorney, you can tailor your health care proxy to permit your agent to have as much or as little power or authority as you want. You can draft your health care proxy to allow your agent to make all health care decisions or only specific ones. Plus, you can outline the agent’s authority in your power of attorney for medical decisions with specific instructions that you want him or her to follow.
In addition, your health care proxy can state your wishes or directions concerning organ and/or tissue donation.
Remember that a health care proxy doesn’t permit your agent to make non-healthcare decisions on your behalf. Again, legal and financial decisions require a power of attorney, as described above.
Your agent or attorney-in-fact will have a substantial amount of power over some of your most private and important affairs. As a result, you should choose carefully. The agent must place the principal’s interests ahead of his or her own, which is the reason that you choose a trusted individual. You can also name more than one agent who can each act independently of one another, or only together (your choice), particularly in the context of a POA. On the other hand, a health care proxy, in the state of New York, only permits one agent to act at a time. You should also name a successor agent as a “back-up” for POA and health care proxy instruments, in the event that the individual you originally named can’t serve in that capacity when the need arises.
You can name anyone to be your agent, often times a close family member (e.g., spouse, child, sibling, parent), provided that the individual is at least 18 years old. Be sure that the person you designate as your agent or attorney-in-fact is trustworthy and honest. You shouldn’t appoint a person as your agent unless you trust them completely.
When your agent accepts the authority granted under your POA, a special legal relationship is created. This relationship between the principal and agent charges the chosen agent with legal responsibilities as a fiduciary that continue until the agent resigns, the POA is terminated or revoked, or the principal dies. An agent is required to do the following:
Yes. As noted above, under current law (NY GOL §5-1513), New York’s statutory short form power of attorney authorizes your agent to make gifts of up to $500.00 annually. It also features an additional document – a statutory major gifts rider – executed simultaneously with the statutory short form power of attorney, which can expand the agent’s gifting authority to allow for trust and asset protection planning, often necessary as the principal ages.
Under the new law signed by Governor Cuomo, effective in June 2021, the power of attorney will be condensed from the current two-document format of the Short Form and Statutory Gifts Rider, to a single, comprehensive document, and general unauthorized gifting is increased to $5,000 annually.
Yes. You can name a monitor and direct that the agent provides the monitor with a copy of the power of attorney and a record of all of the transactions completed on the principal’s behalf. The monitor can request information from the agent at any time.
No. An agent is entitled to be reimbursed from the principal’s assets for reasonable documented expenses incurred on the principal’s behalf.
The principal can expressly provide that the agent be paid “reasonable compensation” in the POA document, and can define what that should be, and by what precise means or method it should be calculated. The POA can also specify the timing of when the agent should get paid.
Yes. A principal has the ability to revoke or terminate his or her power of attorney at any point in time for any reason, provided he or she has the capacity to do so. If the principal is no longer of sound mind, a judge can remove an agent for acting improperly.
If the principal wants to revoke a prior power of attorney, the principal should give written notice of the revocation to the prior agent and to any third parties who may have acted upon it, including the principal’s financial institutions. If the prior POA was publicly recorded, the revocation must also be recorded. Also, unless the principal states otherwise, the execution of a new power of attorney doesn’t revoke a previous power of attorney.
Does a Power of Attorney Expire?
It can. The principal can place an expiration date for a power of attorney. If there is no specific expiration date, the power of attorney lasts until:
As noted, a power of attorney ends at the death of the principal. The agent is only permitted to act on your behalf during your lifetime.
Does a Will Do the Same Thing as a Power of Attorney?
No, it doesn’t. A Will isn’t a substitute for a legally binding power of attorney. A Will provides instructions for the distribution of your property after your death. In contrast, a POA concerns important decisions made during your life, and terminates upon death.
Also, you should have a living will as well as a healthcare proxy. A living will speaks to specific issues and desires that you may have concerning medical treatment in the event that you have a terminal condition, like lifesaving measures and palliative care. But a living will doesn’t necessarily address other important medical issues, like if you’d want a blood transfusion, or particular elective surgery. These are the types of questions that can be directly addressed in a properly executed health care proxy document, as discussed above.
Note that a POA doesn’t authorize an agent to handle or distribute your estate. If you have a will, your executor is tasked with addressing your estate matters. If you don’t have a will (intestacy), then the court will appoint an individual to administer your estate, and your estate assets will be distributed in accordance with the operative state intestacy statute, a result that may well conflict with your own wishes.
Powers of attorney protect your financial and legal interests, and health care proxies help address your health and well-being. And, living wills allow you to answer questions about the care and treatment in your final days and hours ahead of time. If you’re incapacitated and you don’t have these documents in order, your family will likely be saddled with an abundance of enormously expensive and emotionally fraught issues and stresses.
Make sure you not only have a POA, but make sure that it is comprehensive and provides your agent with the powers necessary to assist you, no matter the circumstance. Once executed, make sure to have a POA on file with your investment companies and financial institutions.
It is also vitally important that you have a health care proxy and living will to allow for your agent to assist you with your medical needs.
Do not wait to get your affairs in order. Now is the time to address these essential issues.
Ask an experienced estate planning and elder care attorney at Ely J. Rosenzveig & Associates, PC, to help you in setting up your power of attorney, health care proxy, living will, and Last Will & Testament.