On December 15, 2020, Governor Cuomo signed into law changes to the New York power of attorney (“POA”) law, which will take effect on June 13, 2021. These changes will not impact the validity of an existing POA form and statutory gift rider (“SGR”) if it is executed in accordance with the provisions of the current law. The most notable revisions that will affect the POA moving forward are the substantial conformity standard, eliminating the separate SGR, penalties when valid POAs are unreasonably denied, and safe harbors for third parties acting in good faith. The changes to the POA law also greatly expand both an agent’s authority regarding health care and a principal’s capacity to grant authority over health care finances.
Four Major Changes from the New York Power of Attorney Law
- Substantial Conformity Standard: The new legislation alters the standard of strict adherence to substantial conformity. Under current New York law, to have a valid power of attorney or statutory gift rider, both forms must be written precisely with strict adherence to the statute. This has caused documents to be invalidated in practice due to insignificant errors, which could have severe repercussions. Strict adherence is especially damaging when a principal suffers from illness or incapacity, as it may be too late to correct insignificant errors in a POA form. The new law corrects this flaw by requiring a POA form to substantially comply with the statute; thus, insignificant errors will not invalidate an entire form. The New York General Obligations Law §5-1513 states that “substantially” does not require the power of attorney form to be identical to the statute. If a POA form is at issue under the new legislation, to determine whether it has met substantial conformity, the form should be considered in its entirety to decide whether the purpose of the POA statute was satisfied. This allows POA forms to be validated even if the form has insignificant errors such as mistakes in spelling, punctuation, formatting, etc. The transition to the substantial conformity standard is powerful, as it will help to rightfully validate forms, even when insignificant errors occur.
- Elimination of the Statutory Gift Rider: In general, the POA form is an intricate document made up of two distinct parts, the POA Statutory Short Form and the SGR. Currently, the SGR Form is a separate optional form used if the principal desires to authorize the agent to make gifts of the principal’s assets. The rationale for separating the duties of the agent from the SGR section was to prevent fraud and abuse of power. However, the two forms have caused confusion because of their complex dissimilar requirements. This change in the law allows a principal to authorize gifts in the POA form itself, eliminating the separate SGR. The new law enables a principal to modify the standard POA form to authorize the principal to make gifts over $5,000 in a single year. The new law also allows a principal to make gifts to himself or herself, or to make other gift transactions and changes to interests in the principal’s property.
- Penalties for Unreasonable Refusal to Accept a Valid Power Of Attorney: Currently, the only remedy for a failure to accept a valid POA form is GOL § 5-1510, which limits relief to an injunction compelling acceptance of a POA. This remedy is inadequate without a court’s ability to impose sanctions against third parties. For example, financial firms often reject a statutory form and require their own POA form. As the current law does not stipulate any monetary sanctions based on an unreasonable refusal, the new law will help enforce valid POA forms when applying substantial conformity language. Including a remedy for damages is intended to address the issue of financial institutions and other third parties rejecting POA forms for reasons not relevant to validity. The new legislation creates a presumption that a POA form is valid and permits courts to award damages. Allowing damages will apply only to unreasonable denial to accept an agent’s authority under a statutory short form POA that substantially complies with the statute. Thus, this change will incentivize third parties to accept valid POA forms, since there will be a repercussion for unreasonable rejection.
- Safe Harbor for Third Parties Acting in Good Faith: Lastly, the revised legislation includes the Uniform POA Law provisions that create a safe harbor for recipients of a POA. If the recipient acts in good faith when accepting the POA, even if it is later deemed invalid, they are shielded from liability. Two conditions must be established for protection.
- Acknowledged Signature: The POA must have a principal’s signature and verified by a notary public or an authorized person to take acknowledgments
- No Actual Knowledge of Errors: The recipient must not have “actual knowledge” that the principal’s signature is forged, that the POA is invalid, or that the agent is abusing their authority
Procedure for Acceptance or Rejection of a POA
Once the new law is in place, after receiving a POA the recipient has ten days to decide whether to accept or reject it or request an affidavit or an opinion of counsel. Upon receiving a POA, the recipient should contact a person trained to properly respond.
When asked to honor a POA, a person may request an affidavit from the agent if there are concerns regarding an agent’s authority to act under the POA. An affidavit from an agent should certify that the agent in question does not believe that that the POA is invalid or has been revoked or modified before the execution of the affidavit or has had any changes that may affect the agent’s authority in the transaction. After requesting and receiving an affidavit, the recipient must approve or reject the POA within seven days. However, the new law lacks any repercussions for acting after the seven days or failing to act.
The recipient of a POA also has the option to request an opinion of counsel from the principal before deciding to accept or reject the POA. The principal must provide an opinion of counsel at their own expense, and as they may be required routinely, the expenses should be discussed when signing a POA. The new law does not identify when a person must accept or reject a POA after receiving the requested opinion of counsel.
If the recipient decides to reject a POA, written notice must stipulate all the reasons for such rejection and must be sent to the principal and agent. Reasons for rejection may include non-conforming form, missing or unacceptable signature, invalid notarization, unacceptable identification, the POA is not a signed original or attorney certified copy, suspicion of elder abuse, the agent is named in a money-laundering or anti-terrorist list, and a signature does not match a signature on file within a reasonable timeframe. If the recipient of a POA decides to reject the POA, the new law allows the recipient of a rejection notice to write a response. If the party that originally rejected a POA receives a response, they must respond within seven days and must state whether the power of attorney will be ultimately accepted or rejected.
Emily Viret, currently an intern at Norris McLaughlin, is attending New York Law School as a 2022 J.D. Candidate. There, she is involved in the Center for Business and Financial Law, Legal Association for Women, and the Courtroom Advocates Project. Emily earned her B.S. in Political Science and Public Policy & Administration, cum laude, from James Madison University in 2018. She will be a Summer Associate in the firm’s Cooperative (“Co-op”) and Condominium Law Industry Group.