New Law Requirements for Powers of Attorney In New York State06/22/2021
Effective June 13, 2021, New Yorkers are now required to use a new power of attorney form.
A power of attorney is a legal document that allows you (the principal) to appoint another individual (your agent) to act in your place for the purposes stated in the document. Powers of attorney can be used to assist you in managing your day-to-day financial affairs. For example, a power of attorney can grant your appointed agent the authority to write checks on your behalf or to sell or purchase property for you. A power of attorney may also be used to permit someone to act on your behalf in the event of a sudden emergency or to manage your affairs if you should become incapacitated.
Existing powers of attorney that were valid when signed will continue to be valid. However, powers of attorney that are signed on or after June 13, 2021 must conform to the new law requirements.
There is good news here. The new form has no requirement for a separate statutory gift rider when including a gift-giving power. Such power is important to enable the agent to do estate planning on behalf of the principal.
The new statute also:
- Allows for the power of attorney to be valid if it substantially complies with the statutory requirements (i.e., exact wording is not required).
- Provides for sanctions for banks and other entities that unreasonably refuse to accept a properly executed power of attorney.
- Provides a procedure and timeline for a bank or other entity to reject a power of attorney.
- Allows a person to sign on behalf of and at the direction of the individual creating the power of attorney.
- Increases the agent’s gift-giving power to $5,000 without special authorization.
- Authorizes delegation of duties between co-agents.
- Clarifies an agent’s obligation to maintain records.
- Clarifies that an agent under a power of attorney cannot make healthcare decisions unless the agent has been appointed in a separate Health Care Proxy.
- Requires that the form be executed before two witnesses and a notary.
Frequently Asked QuestionsDo I Need a Power of Attorney and Who Should I Appoint?
A power of attorney is a very useful document because it authorizes another person or persons to manage your financial affairs. It is a powerful document as the person you appoint has control over your assets. If it is a “durable” power of attorney, it may enable you to avoid a guardianship proceeding in the event you become mentally incapacitated (discussed below). Because the powers given in a power of attorney are significant, only a person you absolutely trust should be appointed as an agent in the power of attorney.
Can a Power of Attorney Be Used for Health Care Decision Making?
No. Only a health care proxy can be used to appoint someone to make health care decisions for you. A power of attorney is used primarily for financial decision making.
Can I Limit My Agent’s Authority to Act Under a Power of Attorney?
Yes. A power of attorney can be tailored to meet your individual needs. At one extreme, a power of attorney can be general and give your agent unlimited and unbridled discretion to make all decisions for you (except decisions concerning your health care). A power of attorney can also be limited to provide that your agent can act on your behalf only with respect to a particular activity or activities (e.g., act at a real estate closing or manage a particular account).
What Is a Durable Power of Attorney?
A durable power of attorney is a power of attorney that continues to be effective even after you are no longer competent to make decisions for yourself. If a power of attorney is not “durable,” it cannot be used after the principal becomes incapacitated. The durability of the power insures that you have someone to take care of your affairs should you ever become incapacitated. If you do not have a durable power of attorney and you become incapacitated, there will be no individual who can act on your behalf or access your individual assets to pay any of the expenses arising from your incapacity. This includes assets such as IRA, 401(k) and other retirement accounts. Although such accounts may designate a beneficiary, the beneficiary can only act after your death and not at the time of your incapacity. If you become incapacitated without a durable power of attorney, then only a court appointed guardian may access your assets. The legal proceeding to appoint a guardian is often expensive, time consuming, unpleasant and may result in the appointment of someone you would not want to act on your behalf. Using a durable power of attorney may avoid the necessity of a guardianship.
How Do I Know if the Power of Attorney I Have Is Durable?
In New York state, a power of attorney containing language which states that “this power of attorney shall not be affected by the subsequent disability or incompetence of the principal,” or similar language, confirms that the power of attorney is durable.
Do I Need to Have a Power of Attorney if All of My Assets Are Owned Jointly with Another Person?
While the ownership of a joint account with another allows such joint owner of the account, like the agent in a power of attorney, to manage such account during your lifetime, establishment of a joint account with another person may also result in the surviving owner of the account having a right of inheritance in the account at the time of your death (if the account is a “JTWROS” meaning that the owners of the account own such account as “joint tenants with rights of survivorship” such that each party will inherit such account at the time of death of the other). For this reason, a joint account should not be considered a substitute for a power of attorney, or vice versa.
What About My Passwords and Other Digital assets?
Digital assets, including usernames and passwords for all types of online accounts (such as banking, email and social media), are covered by the power of attorney statute. Further, a provision discussing how digital assets should be handled can be incorporated into the power of attorney form.
If you have any questions concerning the new power of attorney law, or any other estate planning-related matters, please contact the following members of our Trusts and Estates Department or your regular attorney at Warshaw Burstein, LLP.