The new New York State Power of Attorney forms will go into effect on September 1, 2009. Sweeping changes were made to the existing NYS statutes pertaining to Power of Attorneys, as four sections were repealed entirely, twelve other sections were amended and a whopping thirteen new sections were added, making the new statute a staggering 27 pages long.
The rationale behind these changes was the numerous instances of abuses by the designated Attorneys in Fact. Their duties and obligations were not being followed in the purposes envisioned for them by the principal.
I: Highlights of the Statutory Short Form Power of Attorney Changes
1. The new Power of Attorney contains a statement that all prior Powers of Attorney are revoked, unless otherwise stated in the section of the Power entitled “Modifications”, in which case it must indicate whether the Agents under all of the Powers are to act jointly or separately.
2. Agent must also execute Power of Attorney before a notary to make it effective.
3. For an Agent to have the authority to make a major gift in excess of $500.00, the Principal must now also execute a Separate Statutory Major Gifts Rider simultaneously with the Execution of the Power of Attorney and this Statutory Major Gifts Rider MUST be attended by 2 witnesses.
4. Gifts by Agent to themselves must be specifically authorized in the Statutory Major Gifts Rider by Principal.
5. The Principal can choose to appoint one or more people to serve as Monitors to the activities of the Agent. Monitors are entitled to receive a record of all receipts, disbursements and transactions entered into the Agent under the Power.
6. An Agent is not entitled to be compensated unless specifically provided in the Power, except that an Agent may be reimbursed for reasonable expenses actually incurred.
7. Since the Attorney in Fact is now referred to as the Agent in the new form, the Agent will execute instruments pursuant to the Power by signing the Principal’s name by the Agent’s name, as Agent.
NOTE: Although Power of Attorney now indicates Agent’s access to Health Care billing statements; the Agent can’t use Power of Attorney to make Health Care decisions. That requires a separate form.
II: What about the “old” forms?
1. All Powers of Attorney forms executed before 9/1/09 will be grand fathered and not needed to be re-executed, if done properly.
2. Similarly, all Out of State Powers of Attorneys will be respected, whether they were properly executed before or after 9/1/09 and whether the Principal was a New York State resident or not. (Ex. A soldier serving overseas signs POA documents out of state or even a prisoner)
3. Non-Statutory Powers of Attorneys executed after 9/1/09 will likely be respected with the caveat being that where there is a gift provision, we’ll need a Statutory Major Gifts Rider (no unanimous agreement).
III: Title Insurers & Title Agents Responsibilities To Accept These New Forms
So long as there is not reasonable cause, the new forms should be honored.
What constitutes reasonable cause?
1. Refusal by the Agent to provide title insurer or agent the original Power of Attorney or a previously recorded certified copy from the County Clerk or Register’s Office.
2. Title insurer or title agent is aware that at the time Power of Attorney was executed, Principal was deceased or incapacitated or later became incapacitated where the power is non-durable.
3. Power of Attorney was procured by fraud, duress or undue influence.
4. Transfer of Real Property is being made pursuant to a major gifts rider or non-statutory power of attorney that does NOT contain express instructions or purposes of the principal. *
*(This allows further evaluation of the legal forms and also allows further evaluation of the insurance risks involved).
IV: Changes In Underwriting Standards
There have been no substantive changes in the standards, but these new forms must be done properly to ensure that marketability or risk of loss is not affected.
Most worrisome is risk of loss, which includes:
1. Undue influence (especially by a family member)
2. Competency of Principal at time of execution (Nursing Home issue)
3. Present Competency of Principal, if power is not durable (also Nursing Home issue)
WHEN principal is competent controls effectiveness of Power of Attorney, even in cases when Principal later becomes competent and a Guardian had been appointed.
4. “Best interests” of the Principal (tricky to evaluate. Would a provision actually NOT benefit the principal even though they desired to make that provision is one such example)
5. Availability of the original Power (there will be no closing without the original Power of Attorney or a previously recorded certified copy from the County Clerk or Register’s Office)
6. Rights and Claims of Principal’s Creditors, including Departments of Social Services (must be mindful of this aspect, especially POA by elderly – ex. Medicaid)
7. Indemnification of parties who may claim that they “lost out” of a share of the proceeds of a transaction (occurs most often in a family transaction, especially where a provision in a Will provides otherwise)
8. Legal Deficiencies in any of the forms
9. Has the Power of Attorney been revoked or terminated or whether it’s still in full force and effect? (This centers around the timeliness of the Power of Attorney)
NOTE: Partnerships, LLC and Governmental Agencies all qualify as entities, which can exercise these new Power of Attorney forms. A Corporation also can, but we’d need both an affidavit by the Corporation as well as Authority granted by Resolution by a Corporate Officer. (Trusts Can Not)
V. NEW POWER OF ATTORNEY FORMS – CONTENTS
1. INTRO [SECTION (a)]: advises Principal of the seriousness of the Power of Attorney forms
to be executed, the designation of the Agent and further cautions Principal to seek legal
advice if they don’t understand any aspect of this instrument.
2. DESIGNATION OF AGENTS (b) & (c): can be one or more than one Agent. If more than
one, Agents can act together or act separately, depending on the Principal’s decision (if silent,
all Agents must act together)
3. DURABLE POWER OF ATTORNEY (d) & (e): presumed to be durable. If Principal does not want Power of Attorney to be Durable, then it must be stated in Section (g): Modifications
4. GRANT OF AUTHORITY (f): Principal must initialize where applicable the areas by which Agent will now have the authority to act. This can be done individually. Subject (o) allows Agent to delegate authority to act to others. Subject (P) remains on the new form, which allows Agent to act on every area.
5. MODIFICATIONS (g): Principal can now tailor additional provisions of their choice; including the durability of the Power of Attorney, as well as granting of any supplemental powers to Agent beyond those described in (f), Compensation owed to Agent as mentioned in (j).
If it’s too narrow or ambiguous, it will lead to problems.
Essentially, if Principal trusts the Agent, this section in general should be left
alone. If gifts are being delegated, Principal needs to be specific
6. MAJOR GIFTS (h): Only comes into play when the Principal is authorizing Agent to make
gifts which are above $500.00. Principal will also need to execute a Statutory Major Gifts
Rider at the same time as the Execution of this Power of Attorney and must be attended by
2 witnesses.
7. DESIGNATION OF MONITORS (i): Principal can now appoint at least one party to
monitor activities of Agent or Agents. From a title insurance perspective, this will now
cause us to strengthen our efforts to review background of the particular Power of Attorney
parties (Principal, Agent and even Monitors).
8. COMPENSATION OF AGENT (j): optional choice of Principal. If so, must be checked off
and compensation figure must be included in Modification part (g).
9. ACCEPTANCE BY THIRD PARTIES (k): clause used for Title Companies for instance to
rely upon.
10.TERMINATION (l): details how the Power of Attorney will cease (death, revocation inter
alia)
11. ACKNOWLEDGEMENT BT PRINCIPAL (m): same as old forms must be signed before
a notary.
12. IMPORTANT INFORMATION FOR AGENT (n): explains the Agent’s duties and
responsibilities.
13. ACKNOWLEDGEMENT BY AGENT (o): Agent must also sign before a Notary for Power of Attorney to take effect.
*VI. NEW YORK STATUTORY MAJOR GIFTS RIDER – CONTENTS
(TAKES EFFECT WHEN GIFTS IN EXCESS OF $500.00 ARE USED)
This Rider has the “appearance” of a Will and it may ultimately become a way to bypass Probate.
1. INTRODUCTION: Cautions Principal as to what he/she is about to execute in writing.
2. AGENT’S GIFTS TO SELF (a) & (c): Principal must specifically detail major gifts Agent will make to himself/herself to overcome the appearance of self-dealing.
The big worry is whether an Agent would “fill in the blanks” after this Rider was executed.
3. GRANT OF LIMITED AUTHORITY TO MAKE GIFTS (a): Agent is limited to make gifts to Principal’s designated family members but the amount can NOT exceed the annual federal gift tax exclusion, so as to bypass unforeseen tax liabilities.
4. MODIFICATIONS (b): Must be specific for underwriters to approve. Can allow Agent to surpass monetary limitations from (a) as well as expand list of donees to “other beneficiaries”.
Ex. “I give my office at 585 Stewart Avenue, Suite 400, Garden City, NY to YMCA” will be acceptable.
“I give all my residential property located in the State of New York to YMCA” will NOT be acceptable.
5. ACCEPTANCE BY THIRD PARTIES (d): clause used for Title Companies for instance to rely upon.
6. ACKNOWLEDGMENT BY PRINCIPAL (e): same as old forms, must be signed before a notary to take effect
7. WITNESSES (f): Two witnesses are to sign for Rider to take effect and these witnesses cannot be beneficiaries of any gifts contained in the Rider.
WHO PREPARED THE RIDER (g): Rider must state in space provided who prepared this document.
