On January 27, 2009 Governor Paterson of New York, signed a new bill amending many of the existing provisions of the Power of Attorney law. This was enacted to prevent abuse by agents acting on behalf of the principal. Since more time was needed to educate the public and the legal community the effective date of the law was September 1, 2009.
A Power of Attorney is a legal document by which a person (the Principal) can designate an Agent (Attorney-in-Fact) to act on his or her behalf with respect to financial or legal matters. A power of attorney can be general, so that the agent can conduct any sort of business on behalf of the principal; or it may be specific which limits the transactions to those expressly provided for in the document.
There are two types of Powers of Attorney; durable and springing. A “durable” power of attorney contains a statement that the power will be effective even if the principal becomes incapacitated or incompetent. Durable powers end at death unless the document contains an expiration date or the principal revokes the power. A “springing” power of attorney does not become effective until the occurrence of a specified event such as physical or mental incapacity.
The key provisions of the new document are as follows:
1. Requires the “attorney in fact” to sign the Power of Attorney document. Prior to this change, only the principal needed to execute the document. Both signatures now must be notarized.
2. In order for the agent to make gifts, on behalf of the principal, for amounts above $500, the Power of Attorney form will have to be accompanied by a separate form known as a “Statutory Major Gifts Rider” (SMGR). This form will require separate execution and two “disinterested parties” will be required to witness the signatures of both the principal and the agent. The SMGR will also be required if the agent will have the authority to act with regard to trusts, creating joint accounts or changing beneficiaries on retirement plans.
3. The new law also provides for the principal to appoint a “monitor” to oversee the actions of the agent acting on their behalf. This monitor can request copies of any transactions conducted by the agent.
4. The agent will now be held to a “prudent person standard of care”. The agent will now be required to keep a record of all transactions and make the records available at the monitor’s request.
The appointment of an attorney in fact is an important decision. You want to be sure that you are totally comfortable with the individual that you chose for this job, since they will be acting on your behalf in financial and legal matters.
This new law will apply to all Powers of Attorney executed on or after September 1, 2009. However, it will not affect the validity of any power executed prior to the 9/1/09 date. We would recommend that you consult your attorney to determine whether executing an updated Power of Attorney is in your best interest. If you do change your documents, be sure that you provide copies to those individuals and institutions that may be affected by this change.