EFFECTIVE DATE OF NEW LAW & GRANDFATHERED POWERS OF ATTORNEY
Chapter 340 of the Laws of 2010 revised once again the New York State Power Attorney Law. The law amends various sections of Article 5, Title 15 of the N.Y. General Obligations Law. It became law on August 13, 2010. The new changes became effective on the thirtieth day after it became a law and was deemed to have been in full force and effect on and after September 1, 2009 (the date the previous law became effective). According to the effectiveness provision of the law, any statutory short form power of attorney and any statutory gifts rider executed after August 31, 2009 shall remain valid as will any revocation of a prior power of attorney that was delivered to the agent before the effective date of the act.
ISSUE: What if someone had "jumped the gun" last year and started using the prior form before its Sept. 1, 2009 effective date? Would those forms be grandfathered? It appears that they would not.
CAUTION: What if a prior statutory short form power of attorney was signed by the principal, but the agent hadn't signed it as of Sept. 12, 2010? Would it become effective when the agent now signs? It depends on what "executed" means!
POWERS OF ATTORNEY EXEMPTED FROM THE NEW LAW
First, the law would exclude a number of powers of attorney in a new section, 5-1501C. The exclusions pertain primarily to commercial and governmental transactions that were probably never intended to come under the new law. The powers of attorney excluded are:
ISSUE: How broad is the exclusion in (5) above? Does it only apply if the financial institution employee is the agent? Could it be read to include POA's where another agent can authorize a financial institution or bank to act? Would this allow banks, once again, to create their own POA forms?
A "VALID" POWER OF ATTORNEY
Even under the new law some vexing questions remain. What is a valid POA? Can you compel someone to accept a valid POA that is a non-statutory form? Who can execute a POA that does not conform to the requirements of the new law?
To be valid a statutory short form or a non-statutory form power of attorney must meet the execution requirements and contain the warnings in the statute. 5-1501B. (See exception below for powers of attorney executed in another jurisdiction). The amended law continues to only make it unlawful for a third party to unreasonably refuse to honor a statutory short form power of attorney and continues to make a proceeding under 5-1510 the exclusive remedy for enforcement. 5-1504.2.
Powers of attorney executed in another state or jurisdictions in compliance with the law of that state or jurisdiction or the law of New York or that comply with section 5-1501B are valid and a power of attorney executed in New York by a domiciliary of another state or jurisdiction in compliance with the law of that state or jurisdiction or the law of New York are valid in this state. 5-1512.
The prior law had made it unclear whether an individual acting on his or her own behalf could validly execute a non-statutory form which met the other requirements of 5-1501B, specifically the type size, cautions and warnings, and signing and acknowledgement requirements. The amendments in the new law offer some help here. The amendment redefines a "principal" as an individual who executes a power of attorney "acting for him or herself and not as a fiduciary or as an official of any legal, governmental or commercial entity." 5-1501.2(k). Then 5-1501B.1 provides that to be valid, a statutory short form power of attorney, or a non-statutory power of attorney, executed in this state by a principal, must conform to certain requirements including: (1) type size, (2) signed dated and acknowledged by principal and agent, (3) contain caution to principal and information for the agent.
In addition to these requirements in order to make gift transactions a statutory short form must have the Statutory Gift Rider (SGR) provision initialed and be accompanied by a valid SGR. A non statutory form must be executed pursuant to 5-1514.9(b). See 5-1501B.2. That is, the SGR must be signed, dated, acknowledged and witnessed by two witnesses. 5-1514.9(b).
Then, 5-1501B.4 states that nothing of this title shall be construed to bar the use or validity of any other or different form of power of attorney desired by a person "other than a principal" as the term is defined in section 5-1501. This means, in a roundabout way, that a "principal" acting on his or her own behalf cannot execute a valid power of attorney unless it at least conforms to the requirements of 5-1501B. But, see the discussion below about which powers of attorney are enforceable.
POWER OF ATTORNEY ENFORCEMENT
Since a 5-1510 proceeding, is the exclusive remedy to enforce honoring the statutory short form, the question remains whether a non-statutory form that is valid because it conforms to the requirements of 5-1501B or 5-1512, is enforceable by some other action or proceeding.
ISSUE: Does it make any sense that there would be greater enforcement rights available by using a non-statutory form?
Elder Law practitioners who handle guardianship proceedings will be glad to know that the special proceeding under 5-1510 is no longer the "exclusive remedy" for the production of records. 5-1505.2(a). Thus a record production could be compelled in a guardianship proceeding or by subpoena in a criminal or civil proceeding.
CHANGES TO THE STATUTORY GIFT RIDER
The new law retains the statutory major gifts rider (SMGR), but redefines it as a statutory gifts rider (SGR). Although the amended law clarifies that the SGR is necessary for "gifts," and not "other transfers," [5-1514] the statutory form still recites in the modification section, "However, you cannot use this Modifications section to grant your agent authority to make gifts or changes to interests in your property." 5-1513.1(h) [emphasis added]. Unfortunately, this still leaves some ambiguity.
The amended law clarifies that SGR gifting authority must be exercised according to any instructions either in the SGR "or in any other writing provided by the principal regarding the exercise of any authority." 5-1514.5. It continues to allow gifting "for purposes which the agent reasonably deems to be in the best interest of the principal, specifically including financial, estate, or tax planning, including minimization of income, estate, inheritance, generation-skipping transfer or gift taxes." It also continues to leave out of the best interest definition planning for public benefits eligibility.
COMMENT: Elder Law practitioners should consider including in the SGR modification section a provision that the principal considers planning for public benefits eligibility to be in her best interest. Under the amended law it is be clear that without additional gifting powers, the $500 gift limit is not per person per year. The authority for "personal and family maintenance" granted in 5-1513.1(f)(I) would allow the agent to make gifts totaling $500 in a calendar year. 5-1502I.14 and 5-1513.1(h).
A statutory form (either the POA or SGR) continues to require the "exact" wording in the statute, it will not however be prevented from being a "statutory form" by reason of a mistake in wording, such as in spelling, punctuation or formatting, or the use of bold or italic type. 5-1501.2(n) and (o).
The ability to create, modify or revoke a trust is restored to most of the sections of the statute which describe and explain the specifically enumerated powers in the statutory short form, unless such creation, modification or revocation of a trust is a gift transaction. 5-1502A, 5-1502B, 5-1502C, and 5-1502L. Regarding the SGR, 5-1514.3 provides a gift to an individual authorized by the SGR may be made outright or to a trust established or created for such individual for the principal.
CAUTION: Some not-for-profit pooled trusts still require a provision in the SGR modification section allowing both the creation and funding of trusts. Under the amended law, revocation of prior powers of attorney is no longer the default and the modification section can include a provision revoking prior powers of attorney. 5-1503.3 and 5-1513.1(e)
Third parties which must honor the statutory short form include those doing business in New York. 5-1504. The reasons for refusing to honor a power of attorney still includes, the refusal by a title insurance company to underwrite title, however it is now limited to a refusal for a gift of real property made pursuant to a SGR or non-statutory power of attorney that does not contain express instructions or purposes of the principal. 5-1504.1(a)(9).
A power of attorney (statutory or not) that meets the requirements of 5-1501B shall be accepted for recording if it has been signed (and acknowledged) by one agent or if two or more agents must act together, then signed (and acknowledged) by all of them. When a successor or co-agent authorized to act separately from any other agents presents a certified copy of a recorded power of attorney with the agent's signature acknowledged, the instrument shall be accepted for recording. 5-1504.7.
CAUTION: Some County Clerks are requiring that the acknowledgement on the deed not be modified to indicate the signing is by an agent. NY Real Property Law § 309-a does not require that an acknowledgement have the "exact" wording of the statute, but only that it conform substantially to the statutory form acknowledgement. However, since the statutory form would seem to accommodate someone signing in his "capacity" as an agent, I would recommend using an unmodified statutory acknowledgement.
Under the amended law, it is no longer required that every agent be unable to act before a successor can act. The power of attorney may provide for specific agent succession rules. Those rules would go in the form in the section on successor agents. 5-1508.2 and 5-1513.1(c). Signing and acknowledgement by the successor agent is now in a separate section on the form. 5-1513.1(p). Any person, other than an estate or a trust, may act as an agent, co-agent or successor agent. 5-1508.4.
Under the amended law it will no longer cause a conundrum if a principal wants to revoke a power of attorney but cannot locate the agent to give him or her notice. The power of attorney can be revoked by delivering the revocation to the agent in person or by sending a signed and dated revocation by mail, courier, electronic transmission or facsimile to the agent's last known address. 5-1511.3(b). An agent is deemed to have received a revocation when it has been delivered to him or within a reasonable time after it has been sent to his last known address. 5-1511.5(b). Where a power of attorney has been recorded the principal shall also record the revocation in the office in which the power of attorney is recorded. 5-1511.4.