New York state announced new laws for Powers of Attorney back in December 2020 and these are soon to come into effect.
Having a valid and up-to-date Power of Attorney can be essential to estate planning especially if you happen to become incapacitated. It is also crucial to ensure that you can use your document as intended.
To help make sure you are ready for the changes, this article will explain what is going to be different about New York Powers of Attorney this year and what you should know before using your form.
When Will The Changes Come Into Effect?
Whilst Governor Cuomo signed the new changes into law back in December 2020, the modifications don’t become mandatory until June 13th, 2021. From that date onwards it will be essential to follow the latest rules when creating or acting on a newly created Power of Attorney.
The New POA Rules in New York: What’s Changing?
The changes due to be implemented only affect Durable Power of Attorney, General Power of Attorney, and Medical Power of Attorney documents. This does not affect other advance directives or provisions for estate management such as:
There are 5 significant new rules to be aware of from June when creating a Power of Attorney in New York.
Changes to Statutory Conformity
Under New York law at the moment, insignificant mistakes (such as minor differences from the statutory document) can completely invalidate the entire POA form. Of course, this can be very difficult to fix once a Principal has become incapacitated.
To avoid this from happening, the new rules will change the conformity standards to make them less punishing. This means that instead of conforming entirely, the wording of a Power of Attorney must just conform substantially to the statutory form.
No More Statutory Gift Riders
The New York statutory gift rider (SGR) is an additional form that Principals can add to their POA if they choose. It is designed to allow Agents to have the option of making gifts over $500 using the Principal’s assets.
However, under the changes, this will no longer be necessary and the gift rider form will be retired entirely. This is due to the fact that the statutory gifting limit for Powers of Attorney is to be raised from $500 to $5,000 per year rendering the riders effectively redundant.
New Requirements for Signing as a New York Attorney in Fact
The Principal may now direct someone other than their Agent to sign a Power of Attorney on their behalf if they are present in the room. This means that the grantor in question may allow an attorney at law or someone of a similar position to sign the Power of Attorney for them.
This is a significant change as previously only the Principal was permitted to sign Powers of Attorney into effect. Now another suitable party is allowed to do so with the Principal’s direct, in-person permission.
Penalties for Those Who Unreasonably Refuse to Accept Valid POAs
The changes to the laws in New York will introduce penalties for third parties, such as banks, that do not accept valid Powers of Attorney. This is to prevent institutions from insisting that clients only use their in-house forms by blocking statutory and valid self-made documents.
Not only will this make it easier for people to create their own Power of Attorney forms in New York, but it will also empower principals to act if they are unreasonably blocked from using a correctly created document.
The new rules give third parties 10 business days in which to approve or reject a Power of Attorney form for use within their institution. Also, if rejected, the Principal will have the ability to bring special proceedings to compel the third party to comply.
If it’s found that a bank or financial institution unreasonably blocked the use of a POA a court is authorized to grant damages to the Principal. This includes covering reasonable attorney’s fees and legal costs.
Leniance for Parties Acting on New York POAs in Good Faith
On the other hand, to prevent hesitancy from institutions to accept a Power of Attorney, protections have been introduced creating a legal safe harbor for those acting on a POA in good faith. This remains the case even if the document is later declared invalid.
As long as the document appears to be validly executed, third parties will enjoy protection from liability. Additionally, the laws establish 2 conditions for these safeguards, these are as follows:
- The POA must have the Principal’s acknowledged signature, which must be verified by a notary public or another authorized individual.
- The recipient of the POA must have no “actual knowledge” of any reasons that might invalidate the document.
What Happens If I Already Have an Active POA in NY?
Existing New York Power of Attorney agreements and statutory gift riders are not affected by the changes. The new legislation does not apply to any legal documents created before June 13th, 2021.
Therefore if you’re already using a New York POA or you intend to write and activate it before the date that the new rules become mandatory it’ll still be valid. The changes only affect new Power of Attorney forms.
There are many benefits of these changes to the laws in New York. Amongst them are simpler and improved compliance with financial institutions working with your Power of Attorney. Furthermore, it also creates more possibilities to use your own self-made POA by reducing risks of invalidation or non-acceptance.
Creating a Power of Attorney is an essential step to protecting your assets and ensuring your dependents and estate are properly looked after. Click below to customize and create your own today.