At our law firm, we have come across a troubling trend. Some of our clients, acting as agents under Powers of Attorney, have been turned away by banks and other financial institutions simply because the Power of Attorney document was executed prior to 2010, when the New York State Legislature updated its recommended Power of Attorney form.
A useful tool in estate planning, a Power of Attorney (POA) is a legal document, by which one person, known as the "Principal," authorizes another person or persons, known as the "Agent" or "Agents," to act on the Principalâ€™s behalf, with respect to legal, business or financial matters. Effective use of a Power of Attorney can eliminate the need for expensive and time-consuming Guardianship proceedings. It can make it more convenient to assist an aging or infirm family member or friend, and assures that there will be someone with clear legal authority in the event of an emergency.
New York State has a recommended form, known as the Statutory Short Form. Use of the Statutory Short Form has a great many advantages:
- its terms are clearly defined by the statute
- it includes protections which make it easier for third parties to honor it
- it is generally recognized and respected by lawyers, title companies, Courts and financial institutions.
The state legislature has made changes to the Statutory Short Form over the past several years. The latest version of the form went into effect on September 12, 2010. The greatest change was the introduction of the Statutory Gifts Rider, which must accompany the POA. An agent no longer has a presumed or implied power to make gifts on behalf of the Principal. Without the Rider, the gifting power is now severely limited.
Although the state legislature has always provided that Powers of Attorney executed prior to a change in the law remain valid, and although financial institutions and other third parties doing business in New York State cannot refuse to recognize the Statutory Short Form, some financial institutions are rejecting POAs that do not adhere to the current (2010) form, especially if the Agent is attempting to exercise gifting authority. Many financial advisers or customer service representatives simply do not know the law and they turn away the client without making further inquiry. The gifting issue has become particularly problematic, since older Powers do not include the Statutory Gifts Rider.
For this reason, we recommend that if you executed a Power of Attorney prior to September 12, 2010, you contact us to update it. We can revise your documents to meet all the latest requirements and eliminate the potential for problems when the time comes for the Power to be used. While we are at it, we can review other aspects of your estate plan, to be certain your existing plan still meets your needs.
It pays to anticipate estate planning and asset management issues, and to address them before they cause you or your family any unnecessary expense or inconvenience. Please call us if you would like assistance with your estate plan, or have any questions regarding your existing documents.
James F. Burdi, Esq., a Partner in the Business & Transactional Law Practice Group, also works with the Trusts & Estates Practice Group in estate planning and administration. He can be reached at JBurdi@vmmlegal.com or at 516-437-4385, ext. 130.