Jan 2, 2022 New York Durable Power of Attorney – Statutory Short Form
For years, the New York Durable Power of Attorney Statutory Short Form was a source of problems for both the principal who was granting power of attorney (POA), and for the agent to whom authority was granted. The law required elder law attorneys and other professionals who draft POAs to use only the identical words and phrases spelled out in the statutory form or risk having the POA rejected by financial institutions and others.
The New York legislature enacted practical changes to the statute that became effective on June 13, 2021. These changes to the law were applauded by those who work with POAs, and will enable the powers being conveyed in the POA to be exercised without quibbling over trivial variations in spelling, punctuation, or text.
2021 Changes in NY Statutory Short Form Durable Powers of Attorney
The 2021 addition of General Obligations Law §5-1501B created five substantial changes that clarify the authority delegated in the document, as well as simplify the process of drafting, executing, and honoring these short-form POAs.
Here is an explanation of the effect of the new legal provisions:
- Substantially Conforming Language Complies with the Law — The rejection of short-form POAs by banks, brokerage companies, and other financial institutions because the wording did not exactly match the appearance of the statutory form caused havoc in the lives of many New Yorkers. Principals who signed the POA months or years earlier were often unable or incompetent to execute a new POA, leaving the designated agent helpless or requiring expensive and time-consuming legal action.
The new law provides that a short form power of attorney substantially conforming in substance to the wording set out in the statute shall not be rejected or deemed invalid based on “[i]nsubstantial variations in wording. . .”[1]
The law continues to mandate the inclusion of warning clauses to the principal and to the agent that convey the required statutory information, but slight differences in formatting and language, or insignificant errors in spelling and punctuation will not affect the POA’s validity. - Statutory Gift Rider Eliminated — Before the enactment of the new law, the agent to whom the POA was granted was prohibited from gifting more than $500 per year unless the principal executed a separate Statutory Gift Rider (SGR) along with the POA. The SGR provided gifting powers that were, to some, conflicting and ambiguous.
Under the new law, the principal can, within the text of the POA instrument itself, authorize the agent to gift up to $5,000, and may also add language to the modification clause in the POA, to permit gifts exceeding $5,000 in a calendar year. The new law also permits the principal to authorize an agent in the POA itself to gift to themselves and to transfer the principal’s interests in other assets, all without a separate SGR. - Penalties Imposed for Unreasonable Refusal to Accept the Short Form POA — Under the previous law, the statutory short form Durable POA law provided no penalty for persons or entities that unreasonably rejected a short form POA because of some insignificant deviation from the form published in the statute, or because they insisted (as did many financial institutions) on using their own proprietary POA instrument. Now, under the new §5-1501B, if a short form POA substantially conforms with the statutory wording but is unreasonably rejected or deemed invalid when presented to a third party, that party is subject to a judgment for damages and may be ordered to pay attorneys’ fees and costs.
The statute enumerates reasonable grounds for rejecting a short form POA and a time limit within which the third-party must act to accept the POA. The party must either accept, reject, or request the opinion of the principal’s agent or attorney within 10 days of receiving the POA. They then have seven days to give written notice of their acceptance or rejection of the POA. - Good Faith Acceptance is “Safe Harbor” — In light of the potential penalties someone can face if they unreasonably reject a short form durable POA, and the rigid time frame within which they need to resolve any doubts, it is understandable that such pressures may encourage a more generous acceptance of POAs in good faith.
What happens if someone accepts a POA in good faith and it is later found to be invalid? The NY legislature decided to protect those who accept POAs in good faith from liability if the POA is ultimately deemed invalid. This protection clause is referred to as a “safe harbor.” This protection is extended to any third-party who mistakenly accepts an invalid POA in good faith and does not have knowledge of the principal’s lack of competence or failure to authorize the execution of the POA. - Changes in Execution of the POA Process — With the liberalization of some of the previous law’s overly strict requirements, the lawmakers understood the need for securing the authenticity of a principal signature and genuine consent. To address that concern, the statutory short form durable POA will be valid only if the principal or their designated signer execute the documents in the presence of two witnesses, each of whom signs before a notary and in the presence of the principal.
This new process permits a designee of the principal to sign on their behalf if the principal is legally competent but physically unable to sign for themselves.
Experienced Power of Attorney Lawyers Are Ready to Help at Ely J. Rosenzveig and Associates
It is a common misperception that durable powers of attorney are only needed in cases of elder estate planning, or in case of accidental injury or illness. In point of fact, powers of attorney can be invaluable when someone overseas is unable to access important documents, when a college student loses important identifying documents and is unable to access their funds, or when the principal, of whatever age, is temporarily or permanently indisposed owing to physical, emotional, or cognitive impairment
Ely J. Rosenzveig and Associates serves clients of all ages and in all social relationships who need to prepare for unexpected contingencies, and unforeseen circumstances, or simply to help provide a seamless, relatively inexpensive mechanism for asset protection and estate planning. Call (914) 816-2900 today for expert advice about POA’s and other legal documents that you may have questions about.
[1] N.Y. Gen. Oblig. Law § 5-1501B(2)
