December 29, 2020 New Changes to the Power of Attorney Law
KEEPING YOU INFORMED…
We are writing to advise you that, on December 15, 2020, Governor Cuomo signed into law long-awaited changes to the State’s Power of Attorney (POA) law. The new law (A.5630-A/S.3923-A), which takes effect on June 13, 2021, creates a presumption in favor of the validity of a POA by allowing form language to “substantially conform” with the statute rather than requiring it to incorporate the statute’s exact wording, as is required in the existing law. Below is a summary of a few of the relevant changes to the POA law.
Separate Statutory Gifts Rider (SGR) No Longer Required
The SGR’s separate execution requirement was the most common issue with the effective execution of POA(s). The existing law does not allow an agent to make gifts of a principal’s assets in excess of $500 in the aggregate each year, unless the principal has signed a separate SGR. Once in effect, the new law will merge the POA and SGR into one form and allow gifting to be expressly authorized by the principal in the Modifications Section of the POA. While under the Personal and Family Maintenance section, the new law will allow an agent to make a gift of $5,000, in the aggregate, without needing prior express authorization from the principal.
Sanctions for Unreasonable Refusal to Accept Valid POA(s)
Another relevant area of reform concerns third-party acceptance of POA(s). Currently, many banks and third party institutions refuse to honor a statutory POA form due to insignificant drafting errors or institutions requiring the use of their own forms. To act as a deterrent and ensure third parties uphold their obligations to honor valid POA(s), the new law contains a provision that allows courts to award damages if an institution unreasonably refuses to accept a properly executed POA. Once in effect, the legislative reforms will allow awards to include attorney fees and costs.
Safe Harbor Provisions for Good Faith Reliance
To ensure good faith on both sides, the new law also formalizes procedures for when a third party may reject POA(s). The safe harbor provisions allow a third party to be held harmless if it, in good faith, accepts a POA relying on a presumption that the signature of the principal is genuine. The provisions also allow a third party to rely upon an agent’s certification of any factual matter concerning the principal and allows the third-party to request the opinion of counsel regarding any matter of law specific to the POA.
“Exact Wording” is Now “Substantial Conformity”
As previously mentioned, pursuant to the existing law’s standard of “strict adherence” or “exact wording,” minor variances in the form’s language might invalidate the whole POA form. The new law eliminates the unnecessarily onerous “exact wording” requirement and uses a more principal-friendly standard, defined as “substantial conformity.” This means certain minor issues will no longer cause a form to fail, such as excluding irrelevant clauses from the form. Once in effect, the new form will allow the exclusion of any section of the POA indicated as “optional” if the words “intentionally omitted” are drafted in its place. Also, using language from previous statutes or immaterial mistakes, such as typographical errors, incorrect punctuation or use of bold or italic type, will no longer result in invalidating a POA.
Changes Concerning Individuals With a Physical Disability
The legislative reform also will include a technical amendment that will allow a principal with capacity, but without the ability to write and/or sign his or her name due to a physical disability, to direct someone to sign documents at his or her request. To prevent fraud and abuse, the law does not allow a person chosen to sign to also be the proposed agent for the POA.
Provide Authority for Agent to Review Medical Records
In an effort to increase transparency in the medical billing process, the new law will now allow principals to provide the authority to their agents to review medical records relevant to requested healthcare bill payments. This provision does not, however, provide the agent with the authority to pay medical bills. This authority must be provided in the Bank section of the POA.
Pursuant to the new law, prior valid POA(s) or SGR(s) will continue to be enforceable. However, the new law will not fix currently invalid POA(s) or SGR(s). Your POA must be executed after the new law takes effect to be governed by its reforms. If you currently do not have a valid POA and become unable to manage your personal or business affairs, it may become necessary for a court to appoint someone to do that for you. Now is an excellent time to consider whether you may need someone you trust to assist you with your personal affairs in the future.
As stated earlier, the new POA law does not take effect until June 13, 2021. As we get closer to the new law’s effective date, we will provide a more specific outline of the new POA, the POA form and how the reforms to the current POA legislation may benefit individuals proactively considering who they may want to choose as an agent for their power of attorney.
If you have any questions regarding the new POA law or need assistance in reviewing an old POA or SGR form, please contact Jeffrey A. Zankel (firstname.lastname@example.org), Diane J. Moffet (email@example.com), Mara N. Harvey (firstname.lastname@example.org), Michelle A. Mahabirsingh (email@example.com) or one of our other attorneys at 631-694-2300.
THIS MEMORANDUM IS MEANT TO ASSIST IN GENERAL UNDERSTANDING OF THE CURRENT LAW. IT IS NOT TO BE REGARDED AS LEGAL ADVICE. THOSE WITH PARTICULAR QUESTIONS SHOULD SEEK THE ADVICE OF COUNSEL.
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© Lamb & Barnosky, LLP 2021