Author: Catherine M. Callery (Kate)| Louise M. Tarantino
Significant changes to the use of powers of attorney in New York became effective September 1, 2009. Presently, this instrument is utilized in transactions that are much more complex than originally envisioned by the law. The revisions are intended to address gaps in the N.Y. General Obligations Law (GOL), which governs the powers of attorney, and to address the ambiguities surrounding the creation of powers of attorney. See GOL §5-1501 et seq.
The new statutory short form power of attorney requires that a major gifts rider accompany a grant of authority to make major gifts of at least $500. This major gifts rider must be signed by the principal, duly notarized, and witnessed by two persons in the same manner as the execution of a will. The creation of a major gifts rider is meant to ensure that the principal is aware of the seriousness of granting the agent such authority.
The powers of attorney revision adds the term “health care billing and payment matters” to the term “records, reports and statements” in order to allow an agent to examine, question, and pay medical bills on behalf of the principal, so long as the principal has executed a health care proxy.
In order to eliminate an agent’s abuse of the power of attorney, the agent will be held to a higher degree of accountability. The agent is now required to disclose to third parties that he is acting as an agent on behalf of the principal. An added section states that the agent has a fiduciary duty to the principal, and it also sets out the agent’s role, the agent’s fiduciary obligations and the legal limitations on the agent’s authority. The agent will only receive compensation if it has been clearly designated by the principal.
In order to better inform the principal of the gravity of the document, the “Caution” section has been expanded. There is also a section explaining how the agent can revoke the power of attorney, and a section explaining that a principal has the ability to appoint someone to monitor the agent’s actions.
Under the new revisions, third parties are required to accept a power of attorney unless reasonable cause is demonstrated. The revision also expands the definition of third parties, or financial institutions, to include securities brokers, securities dealers, securities firms, and insurance companies. Some examples of reasonable cause given in the statute include situations where the third party has actual knowledge of the death of the principal; has actual knowledge of the incapacity of the principal and the power of attorney is non-durable; has actual knowledge that the principle lacked capacity when the power of attorney was signed; or actual knowledge of an adult protective services referral. Further, it is unreasonable for the third party to require that the power of attorney be on the institution’s own form.
These changes to powers of attorney should limit ambiguity and give the principal a better grasp of the authority the agent will obtain through this instrument. By giving the principal the knowledge necessary to navigate this instrument, it will reduce the possibility of abuse by his or her agent.
Thanks to summer law intern Stephanie Scalzo for reporting on these important changes.