On December 15, 2020, Governor Cuomo signed into law a comprehensive amendment to General Obligations Law §§ 15-1501, et seq., the statute setting forth the requirements for power of attorney forms. The new legislation greatly simplifies and improves the statutory power of attorney form, and imposes new penalties for banks and financial institutions for refusing to enforce the forms without cause. The existing version of the statute proved to be very complex, and nearly impossible to interpret and execute without an attorney.
While the old law required the exact language of the statute to be incorporated into the document, and considered any deviations from the statutory short form to invalidate the document, the new legislation relaxes those requirements. Under this amendment, power of attorney forms that “substantially conform” to the statutorily required language are considered fully enforceable. Specifically, power of attorney forms that contain insignificant mistakes in wording, spelling, punctuation or formatting, that use language substantially similar to that set forth in the statute, do not include clauses that are irrelevant to the principal at issue, or contain minor deviations in the “Caution to the Principal” or “Important Information for the Agent” sections of the document are permitted under the amendment.
Notably, the amendment also eliminates the need for a separate Statutory Gifts Rider in order for the agent to make gifts on behalf of the principal. Instead, the amendment directs the principal to delegate authorization to make gifts in the “Modifications” section of the document, and automatically permits the agent to make customary, annual gifts to individuals and charitable institutions not to exceed $5,000 on behalf of the principal.
The amendment creates a presumption in favor of the validity of a power of attorney form. Within ten business days of receipt, a third party is required to either (a) honor the power of attorney designation, (b) reject the power of attorney designation in a writing setting forth the reasons for rejection or (c) require the agent to execute an affidavit stating that the power of attorney is fully enforceable. Only certain enumerated circumstances justify rejection under the amendment, including actual knowledge of a report to the local adult protective services unit, actual knowledge of the principal’s death, refusal of the agent to provide the original power of attorney or a certified copy, etc. If the third party rejects the power of attorney without reasonable cause, the amendment permits a court to assess damages against it, including reasonable attorneys’ fees and costs. On the other hand, if the third party reasonably accepted the power of attorney form, it shall not be held liable for any unauthorized transactions by the agent. The new enforcement provisions will also apply to any earlier Power of Attorney signed in accordance with laws in effect when executed.
The amendment also allows the principal to permit an authorized signatory to sign the document for them and expands the agent’s access to the principal’s health care records and benefit information.
The amendment takes effect in 180 days, or on June 13, 2021. After that date, power of attorney forms following the “old” statutory language, as well as those that substantially conform to the new language, will be effective in New York state. It is anticipated that a chapter amendment will be issued prior to the effective date providing further guidance and suggested forms.