Things just got much more complicated
Until recently, New York had a fairly simple statute authorizing the use of a statutory short form power of attorney (POA) that was widely available from websites and stationery stores. To deal with issues more complicated than contemplated by the statutory short form, attorneys often prepared individually drafted forms. These powers were usually valid under general agency principles.
Then, on Sept. 1, 2009, the New York law that governs POAs executed by individuals as principals became considerably more complex. On that date, new legislation amending the POA provisions of the New York General Obligations Law (GOL) took effect. Any power of attorney executed in New York on or after Sept. 1, 2009 by an individual as principal is invalid unless it complies with the new law.
The new law makes significant changes to the existing POA law. Among the most important is the creation of a new statutory short form POA.
Thereâ€™s also a new rider that must be appended to the statutory short form POA for an agent to make gifts in excess of a minimal amount and to execute other significant financial decisions of a donative rather than commercial nature.
Plus, a new, valid power of attorney must contain more than 600 words of language from the statute that are intended to better inform the principal about the serious nature of the power of attorney document, and to explain the role of the agent, the agent's fiduciary obligations and the legal limitations on the agent's authority.
The new law provides that any POA executed prior to Sept. 1, 2009 will remain valid. So, if you have an existing POA, itâ€™s not necessary to execute a new POA.
Still, parts of the new legislation are applicable to a POA executed
before the effective date of the legislation, including:
â€˘ All statutory short form POAs must be honored by any third party in New York, unless there is reasonable cause not to honor such POA.
â€˘ All agents are subject to the codification by the new legislation of an agentâ€™s standard of care and fiduciary duties.
â€˘ Special Proceedings will be available for all POAs.
â€˘ Powers granted as to benefits from military service are expanded to include benefits from governmental programs and civil service.
â€˘ All agents have access to health care records in accordance with HIPAA and the ability to make decisions as to the payment for the provision of health care.
Unresolved issues related to POAs, whether executed before or after the new lawâ€™s effective date, now may be resolved through a special proceeding. This proceeding may be brought to compel an agent to make available a copy of a POA and/or a record of all transactions entered into by the agent on the principalâ€™s behalf.
Such proceedings can be brought by certain persons or entities authorized under GOL Section 5-1505(2)(a)(3), which includes co-agents and successor agents, government entities, and certain court-appointed individuals. In addition to those persons, the agent, the spouse, child or parent of the principal, the principalâ€™s successor in interest or any third party who may be required to accept a POA may bring a proceeding for a number of other reasons, including to:
(1) determine the validity of a POA,
(2) determine whether the principal had capacity when the POA was executed,
(3) approve an agentâ€™s transaction record, or
(4) remove agents.
Note that the new legislation creates a practical problem for the continuing validity of previously executed POAs. Under new GOL Section 5-1511(6), "[u]nless the principal expressly provides otherwise, the execution of a power of attorney revokes any and all prior powers of attorney executed by the principal."
As a result, if you execute a new POAâ€”even one thatâ€™s for limited purposes such as one youâ€™d give to an accountant to represent you in a tax auditâ€”on or after Sept. 1, 2009, that POA will revoke any existing POA you executed for any purpose.
To avoid this result, the new POA must specifically state that it does not intend to revoke previous POAs.
The new law contains no exceptions for powers executed in connection with day-to-day commercial transactions such as stock powers, shareholder proxies, and powers given to creditors in connection with a credit transaction. This troubling and perhaps unintended extension of the protective principles of the new law to arm's length and other commercial transactions has the potential to significantly impede ordinary commercial activity within New York State.
A technical corrections bill is before the state Senate. Until it passes, though, beware.