Posted On: January 4th 2010
Governor Patterson signed major amendments to the New York State General Obligations Law, of Title 15 of Article 5, governing powers of attorney (POA) on January 27, 2009. The effective date was initially March 1, 2009, and was delayed until September 1, 2009. However, some provisions apply to current POAs. Chapter 644 of the Laws of 2008 introduces the Statutory Major Gifts Rider (SMGR).
The amendments are a result of concern over abuses by Attorneys-in-Fact and concern for oversight and additional controls to implement over the Attorney-in-Fact, especially for when the Principal becomes incapacitated. In addition, the current form lacked clarity on how a Power of Attorney could be revoked, and did not fully address issues relating to HIPAA releases.
It should be noted that validly executed Durable Powers of Attorney (on or before August 31, 2009), are still effective and remain effective after September 1, 2009. However, the new forms are not effective, and should not be used or signed prior to September 1, 2009. This statute has a prospective effect.
The new Statutory Short Form is a Durable Power of Attorney. The default is a Durable power. If this form is used, you must indicate whether it is anything other than Durable, such as a Springing power.
The new form requires the signature and acknowledgement of the Principal and Agent, and will not be effective until ALL co-Agents, (if there are multiple Agents), sign and have their signature acknowledged.
Another important change is that the fiduciary’s (Agent/Attorney-in-Fact’s) obligations are spelled out on the form. Therefore, the Agent will know from the outset what their responsibilities are.
One critical change is that when you sign, unless the Power of Attorney says to the contrary, it invalidates ALL other Power of Attorneys. This could have devastating results. For example, consider if you spent substantial time with your attorney, drafting a new and very comprehensive Statutory Short Form Durable Power of Attorney in September 2009. Then in November 2009, you go to XYZ Bank and sign a Power of Attorney there. That November 2009 would technically override the September 2009 Power of Attorney you worked so hard to craft. Technical corrections have been submitted to Albany, so that prior Power of Attorneys are not revoked UNLESS you provide that they should be revoked.
There is a new power, enumerated (I), entitled “personal family maintenance”. It provides that an Agent/Attorney-in-Fact can make gifts the person traditionally made to any beneficiary up to five hundred dollars ($500) per beneficiary. There is also a current Technical Correction submitted to make it gifts up to five hundred dollars ($500) in the aggregate. This emphasized the utilization of the Statutory Major Gift Rider (SMGR).
There will now be two forms to comprise the POA. The first is the Statutory Short Form Durable Power of Attorney. The second document is known as the Statutory Major Gift Rider (SMGR). The SMGR will go into great detail regarding assets, authority to gift and related maters. Many of the powers in the current durable power of attorney concerning creating joint bank accounts and trusts were stripped out of the current Power of Attorney and put into the SMGR. Any powers beyond making annual exclusion gifts will be considered additional powers, and will be a modification to the new Form. Some examples include modifying a trust, creating joint bank accounts, setting up trusts, giving gifts to self (Agent). The critical change is that this is not a form that an average person can go out and get. Rather they must sign with the FORMALITY OF A WILL. Ostensibly this brings attention to the Principal of the gravity of the situation and the powers being granted to the Agent/Attorney-in-Fact. It emphasizes that the powers given are much more than merely bill paying abilities.
Another key innovation under the Statutory Short Form is that it can provide a Monitor. In the event of the incapacity of the Principal, the Monitor can force the Agent to accumulate all records since they became Agent within FIFTEEN (15) days to the Monitor. Recordkeeping has always been an obligation of the Agent. However, now the responsibility has become more pronounced and enforced. On day sixteen (16), if the Agent has not provided the records to the Monitor, the Monitor can commence a Special Proceeding to force an Accounting by the Agent. In addition, the Principal can implement this procedure. Formerly it was unclear what to do when a Principal wanted to revoke an Agent’s power. Now, with this mechanism, it has become much clearer. Revocation is also more explicit under the new law. Revocations must be sent by Agents to any third party involved. There is currently a technical correction in review that notice is not required to financial institutions.
Third parties will be forced to honor this form. Financial institutions, which may have previously required you to complete their form, rather than honoring your Power of Attorney now, could be subject to a Special Proceeding if they refuse to honor the form. There are exceptions, such as if the institution is acting in good faith, or has actual or reasonable belief of undue influence or duress. However, the financial institution CANNOT refuse to honor your Power of Attorney merely because you have an old form.
These are the highlights of the new legislation as it relates to the new forms. There are several other details that cannot be covered in an article of this depth. I suggest you consult an estate planning profession to help guide you through this process so that you would fully understand the full impact of these new legislative changes.