Power of Attorney
Estate Planning at Laidlaw Firm
In 2009, the New York legislature amended its Power of Attorney statute. The revised statute has dramatically altered the form to be used. There are good and bad things about the new power of attorney form. I’ll start with the good:
Pros
Designed to Prevent Fraud and Abuse by your Agent
The main purpose of the new form is to remove any doubt as to whether the person granting the power of attorney (the principal) intended to give the person receiving the power of attorney (the agent) the ability to gift money to himself or herself.
Nearly 99% of controversies surrounding powers of attorney relate to whether agents have breached their fiduciary duty by making gifts to themselves. By creating a rider to the power of attorney form, named the “Statutory Major Gifts Rider", the principal can set forth in writing the exact gifting powers the agent has, thereby reducing the possibility of a costly legal battle down the road.
Financial Institutions Compelled to Accept the New Power of Attorney
In the past, one of the most frustrating experiences for my clients comes when, as agents, they bring the power of attorney to their local bank and try to act under its authority. Banks routinely reject such powers of attorney and instead insist that the principal execute the banks’ particular form.
The revised statute creates liability for a financial institution that refuses to accept a properly executed power of attorney, but only as long as it is the form most recently adopted by the New York legislature. A power of attorney executed prior to 2010 will not be covered by this provision.
Cons
New Form Is Long and Cumbersome: The old power of attorney form was two pages long. The new one is up to 12 pages long if the principal wants to give the agent additional gifting powers. It is very difficult for elderly clients to labor through the form. I frequently read the form aloud to clients, in an effort to ensure that they’ve read the entire form from start to finish. Nonetheless, because of the complexity and length, there could be legal battles over whether the person granting the power of attorney really understood the nature of the power they were granting.
Where No Attorney, High Chance Not Signed Properly
The new form has to be initialed, signed, notarized and witnessed in several places. Some clients want to economize by not having an attorney supervise the execution of the power of attorney.
When the forms are later returned to me, they often are not executed properly. This means that they will not be honored by financial institutions, thus defeating the purpose of naming a Power of Attorney.
Recommendation
I would recommend using the new power of attorney form, as it will protect you and your heirs from possible fraud by an agent and provide leverage against a financial institution that hesitates to accept it. I recommend using an attorney to draft and supervise the execution of the form, in order to make sure that your objectives are achieved by having a binding power of attorney.
If you have a parent or other relative that is declining in health, I would recommend having them sign the power of attorney as soon as possible, so that there is no doubt as to their capacity to understand the power they are granting. Please feel free to email me or call my office to set up a free, fifteen minute initial phone consultation to discuss this and any other legal estate planning issues, such as wills and trusts , estate administration and probate.