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The New Power of Attorney: Keeping Your Clients Informed

By Robert M. Freedman
 
Robert M. Freedman, a pioneer in the field of Elder Law, is a Partner at Mazur Carp Rubin & Schulman PC. Mr. Freedman’s practice focuses on Elder Law and Planning for Individuals with Disabilities and their families. You may contact him at rfreedman@mazurcarp.com or visit http://www.mazurcarp.com.

Mr. Freedman spoke at the October 8, 2009 ESCOTA general membership meeting.
  1. There is a new law which drastically changes the use of a Power of Attorney.

  2. A Power of Attorney is used to authorize an agent (used to be called an “attorney-in-fact”) to handle legal and financial matters on behalf of the principal. It was often used to authorize a spouse, child or other family member in case of the future incapacity of the principal. Many seniors routinely executed Power of Attorney forms as part of their estate plan.

  3. There was concern that some agents were taking advantage of seniors and getting control of their assets by having the senior execute a Power of Attorney. Most elder law attorneys did not see this as a major problem, and depended on the Power of Attorney as the cornerstone of future care planning. However, the concern about misuse of the Power of Attorney caused the state to totally revise the form, making it far more complicated to draft, to sign and to use. While it was always advisable to consult with an attorney before executing a Power of Attorney form, it is now absolutely essential to consult an attorney when executing a Power of Attorney. And while attorneys used to do the forms for little or no charge, fees are now expected to be substantial.

  4. Powers of Attorney executed before September 1, 2009 remain valid. However, some of the provisions of the new law apply to pre September 1, 2009 Powers of Attorney.

  5. All Powers of Attorney executed after September 1, 2009 must comply with the new law. The General Power of Attorney form called a Statutory Short Form must now be on the new form including the exact wording of the statute in type of no less than 12 point size. The form must be dated and signed by the principal and the agent, and both signatures must be notarized. All other New York Powers of Attorney, referred to as “non-statutory powers” must comply with the new law.

  6. The new form was specifically designed to prohibit agents from making any gifts without specific authority in the Power of Attorney Form and a mandatory Statutory Major Gifts Rider. Without this specific authority, the agent cannot make gifts exceeding $500 per year, nor can the agent do tax, Medicaid or any estate planning. The Statutory Major Gift Rider is very complicated and must be filled out in detail to be effective. It also must be witnessed by two witnesses. This form will have to be drafted by an attorney.

  7. The new form requires the agent to sign and have his signature acknowledged before a Notary in order for the Power of Attorney to be valid. The agent can sign any time after the principal. A principal can appoint multiple agents to act separately or jointly. Agents must sign all documents as “agent for the principal”. The agent must agree to certain duties and acknowledge that he or she will be liable for acting in violation of his or her authority. This places a greater responsibility upon the agent and makes the agent potentially liable for his or her actions or non-actions. Agents may have to retain their own attorneys to advise them since there is a potential conflict between the principal and the agent, and the attorney who drafts the document represents the principal. This will make future care planning more difficult and more expensive. The Power of Attorney has a specific provision to fix compensation for the agent which must be filled out. The principal can determine whether or not to compensate the agent and decide how the compensation is to be calculated. If there is no compensation, the agent may decline to serve.

  8. Under current law, the execution of any Power of Attorney revokes all prior Powers of Attorney unless the principal provides otherwise in the document.

  9. Third parties, such as banks, financial institutions and title companies cannot unreasonably refuse to honor a Power of Attorney, either an original or a certified copy. However, the only remedy available to the agent in case of unreasonable refusal is to bring a Special Proceeding in court. There are no penalties to the refusing Third Party.

  10. There are numerous (far too numerous to delineate) problems with the new statute, and there are likely to be technical corrections to the law in the Spring.


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