As of June 13, 2021, New York State enacted a new statutory Power of Attorney (“POA”) form. Any POA created prior to this date will remain effective if it conforms to the current law at the time of its execution. The newly reformed POA form enacted four major changes that are designed to simplify the prior POA form. They include; allowing for substantially compliant language rather than exact wording, eliminating the Statutory Gifts Rider (“SGR”), allowing sanctions for those who unreasonably refuse to accept a valid POA, and provide a safe-harbor provision for good-faith acceptance of an acknowledged POA. The four major changes are outlined below.
- Substantial Conformity: Under the prior law a POA was considered valid if it was written precisely with strict adherence to section 5-1513 of the General Obligations Law. Sometimes minor errors such as spelling or punctuation would render an entire POA invalid. The new law corrects this flaw by requiring a POA form to “substantially comply” with the statute, therefore minor errors will no longer invalidate the entire document.
- Elimination of the Statutory Gift Rider: The prior POA form was made up of two parts, the POA Statutory Short Form and the SGR. Previously, the SGR form was separate and optional if the principal desired for the agent to make gifts of the principal’s assets. This caused confusion in the past and many times the SGR was not properly completed. The new change in law allows a principal to authorize gifts in the POA form itself, eliminating the separate SGR document. Under the new law a principal may make gifts over $5,000 in a single year in the Modifications section of the POA form itself.
- Penalties for Unreasonable Refusal to Accept a Valid Power of Attorney: Previously the only remedy for a failure to accept a valid POA form is GOL § 5-1510 which limits relief to injunction compelling acceptance of a POA. The new legislation creates a presumption that a POA form is valid and permits courts to award damages. This change will urge third parties to accept valid POA forms given the new reproductions for unreasonable rejection. The new law requires third parties to now accept or reject the form within 10 business days of it being presented.
- Safe Harbor for Third Parties Acting in Good Faith: The new POA law provides a safe harbor for recipients of a POA. The recipient will be shielded from lability if they acted in good faith when accepting the POA even if it is later found to be invalid. For the safe harbor law to apply there are two conditions that must be met. First the POA must have a principal’s signature and verified by a notary public or an authorized person to take acknowledgements. Second 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. The new law further provides a third party may sign for the principal at the principal’s direction if the principal has capacity but is under a physical disability and is unable to sign or initial the document.
Overall, the main take away from the changes to the New York Statuary POA form is the new signing requirement which states the POA must be signed, initialed, and dated by a principal with capacity. As mentioned above a third party may sign for a principal only if the principal has capacity but is physically unable to sign. The POA must be acknowledged and witnessed by two persons who are not named in the instrument as agents or as gift recipients. The person who takes the acknowledgement (the notary public) may also serve as one of the witnesses.
Adam Leitman Bailey, P.C. strongly encourages consultation with an attorney before executing a POA. Adam Leitman Bailey, P.C. can prepare and arrange for the signing of POAs under the new law. We are actively using the new form for our purchase and refinance closings and our staff is ready to answer any questions or concerns regarding the change in law and new signing requirements.