This is a scenario that many attorneys who deal with the frail and the elderly have witnessed. Jeanne S., who is 90 years old and recently lost her husband, was doing fine until a sudden stroke left her unable to handle her financial affairs.
Fortunately, when Jeanne’s will was updated, her attorney had her sign a durable power of attorney naming her daughter as her agent. Her daughter takes the form to Jeanne’s bank, but they refuse to honor it, claiming it’s too old and not an official bank document.
Meanwhile, Jeanne’s utility, insurance, and mortgage bills go unpaid. Ironically, the same bank that refused to honor the power of attorney is piling on late fees and threatening to foreclose on her mortgage.
New York’s power of attorney law, in effect since 2009 has long required banks and financial institutions to honor the statutory short form power of attorney that Jeanne signed. But until now, there was no penalty when a third party refused to honor that form.
A court had no power to award attorneys’ fees, costs, or damages, so there was no effective mechanism to enforce the law. Many banks, rather than risk the liability of accepting an invalid form, erred on the side of caution by just saying no.
New Law Based on N.Y. State Bar Proposal
That changed on June 13 when New York’s new power of attorney law went into effect. The revised law simplifies the form and adds provisions to prevent fraud and abuse.
But most importantly, it puts the teeth of damages and attorneys’ fees into the law’s enforcement provisions and creates a timetable for accepting the power of attorney that will allow an agent to begin signing checks and paying bills within a reasonable amount of time.
The changes were based on a proposal by the New York State Bar Association, whose members struggled with the arduous provisions of the previous law for 11 years. The updates were passed in 2020, followed by a six-month “learning period” before taking effect. A provision requiring two people to witness the signing of the document was added in March at the request of the governor to prevent fraud or abuse.
New York Joins Growing Number of States
Many parts of the New York law are based on the Uniform Power of Attorney Act, which has served as a model for states across the nation.
By enacting the new law, New York joins a growing number of states—including Alaska, Florida, Indiana, Massachusetts and Pennsylvania—that have not adopted the Uniform Power of Attorney Act, but allow a court to award attorneys’ fees, costs, and damages for the unreasonable refusal to accept a power of attorney. Indiana has gone so far as providing for three times the actual damages.
In addressing the issue of damages for the unreasonable refusal to honor a valid power of attorney, the Uniform Power of Attorney Act includes provisions for reasonable attorneys’ fees and costs incurred for legal efforts to force acceptance.
States can modify the provisions of the Uniform Power of Attorney Act. For example, Iowa’s version of the act contains a specific provision authorizing the court to award damages in addition to reasonable attorney fees and costs.
The new law also says the form must substantially conform to the statute’s wording rather than contain the exact wording, making it easier for banks to make sure that a form is proper despite minor mistakes. To prevent fraud, it also requires notarization and two witnesses, one of whom can be the notary.
We hope the new law will simplify the process of executing and using a power of attorney and afford the elderly and disabled the comfort of knowing that someone acting as their agent will be able to handle their finances if they become incapacitated.
Looking ahead, attorneys and others both preparing and accepting New York powers of attorney need to be aware of several new facts:
- They should realize that documents that were valid under the statute in effect when executed remain valid.
- If an outdated form is used on or after June 13th, however, the power of attorney will be invalid, since it will not have the two required witnesses.
- Since New York’s Gift Rider has been abolished, the modification section of the power-of-attorney form must be carefully drafted if the ability to make gifts or transfer the principal’s property is to be included.
- The damages and attorney fee provisions apply to all existing powers of attorney.
The simplified form will make it easier for lay persons executing a power of attorney to understand what they are signing. The drafters, however, must still understand the law and all its nuances. Banks and financial institutions will have to adopt procedures for the acceptance or rejection of a power of attorney to avoid liability.
This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.
David Goldfarb is of counsel to Grimaldi & Yeung LLP. He is a former chair of the Elder Law and Special Need Section of the New York State Bar Association. He was a member of the NYSBA Task Force on the Power of Attorney and helped draft the changes that were signed into law in 2020 and 2021. He led a team of lawyers that developed the Power of Attorney form published by the New York State Bar Association.
Richard A. Weinblatt is a partner at Haley Weinblatt & Calcagni LLP in Islandia, N.Y. He is a past chair of the New York State Bar Association’s Elder Law and Special Needs Section and is a former co-chair of the Suffolk County Bar Association’s Elder Law Committee. He is also an adjunct professor at Touro College Jacob D. Fuchsberg Law Center.