Surprisingly, the new law does not contain a form for the revocation of a Power of Attorney. The old law failed to provide a revocation form as well.

The new legislation may have been designed to be a more transparent document, but statutory conformity has been made more complicated, and not necessarily easier to understand. As we work with the new statute over the coming year, we will discover whether or not the legislative intent has been realized.

Statutory short form — Overview

As of September 1, 2009, major revisions to the General Obligations Law regarding Powers of Attorney become effective.

Powers of Attorney Executed Prior to September 1, 2009. Because of the major changes adopted, it is relevant to note that all Powers of Attorney, properly executed and in full force and effect prior to September 1, 2009 remain valid.

Types of Powers of Attorney Unchanged. As of September 1, 2009 there will still be:

(a) Durable Powers of Attorney;

(b) Non-Durable Powers of Attorney;

(c) Limited, including single transactional Powers of Attorney;

(d) Springing Powers of Attorney, designed to take effect at a future time

(e) Modified short form Powers of Attorney, which add additional authority to the agent. The format of the modified short form Power of Attorney has been changed to require a “major gifts rider;” which will be explained below.

Definitions. The law now begins¹ with a series of sixteen (16) definitions, some of which are new to the law.

The second definition defines: “Benefits from government programs or civil or military service” This definition includes “... any benefit, program or assistance provided under a statute or government regulation, including social security, Medicare and Medicaid.” The specific references to Medicare and Medicaid were not included in the previous statute.

The third definition more closely defines “capacity” by requiring comprehension of executing, granting, revoking, amending or modifying a Power of Attorney or the authority of any person to act as agent under a Power of Attorney. Considering the specificity of the requirements for capacity, it is possible that this will encourage more challenges to the validity of Powers of Attorney.

The fourth through the seventh definitions define agent compensation, financial institutions, incapacity, which is “defined” as “to be without capacity” and the internal revenue code which is defined as the internal revenue code of 1986 or any subsequent federal tax code.

The eighth definition, introduces a new player in the Power of Attorney field which is designated as a “monitor.” A monitor is a person, designated by the principal in the Power of Attorney, who is authorized to “request, receive and seek to compel the agent to provide a record of all receipts, disbursements, and transactions entered into by the agent on behalf of the principal.”

Definitions nine through thirteen add no new concepts to the law. They define a “person,” a Power of Attorney, a principal, a record whether it be tangible or in electronic form, and finally defines “sign” which goes on to list everything from an actual signature, to electronic signatures. The definition does go on to provide that a Power of Attorney that is recordable under the Real Property Law, “... shall not be executed with an electronic signature.”

Statutory Major Gift Rider. Definition fourteen introduces an entirely new concept regarding powers of attorney, known as a Statutory Major Gifts Rider. If the principal desires to grant gifting authority or compensation to the agent, such authority must be set forth in the Statutory Major Gifts Rider, and not in the body of the statutory short form Power of Attorney. The form for the Major Gift Rider and its requirements are set forth in Gen. Oblig. L. §5-1514, and will be further referred to below.

Definition fifteen defines the statutory short form Power of Attorney as meaning a Power of Attorney that meets the requirements of Gen. Oblig. L. §5-1501B, and contains the exact language of the form which is set forth in Gen. Oblig. L. §5-1513. The definition goes on to limit the Power of Attorney to grant the authority as set forth in Gen. Oblig. L. §§5-1502A through 5-1502N. Although modifications are authorized, the definition of statutory short form Powers of Attorney specifically prohibits a statutory short form Power of Attorney from authorizing any modifications or additions that are provided for in Gen. Oblig. L.. §5-1514, which is the Major Gifts Rider. The legislation leaves no room for doubt that granting an agent authority for gifting or compensation, can be accomplished only by the execution of a Statutory Major Gifts Rider, and may not be contained in the Power of Attorney itself.

Modification Section. The statutory short form Power of Attorney form as set forth in Gen. Oblig. L. §5-1513 does have a “modifications” section. If the principal desires to authorize the agent to make gifts, he/she must initial the box that provides that the agent is granting gifting authority “in accordance with the terms and conditions of the statutory Major Gifts Rider that supplements this Power of Attorney.”

The modification section then contains an optional designation of a “monitor” or more than one monitor. The name and address is placed in the space provided in the modification section. The final portion of the modification section is the optional authority to compensate the agent for services rendered. This goes beyond the authority that enables reimbursement to the agent for reasonable expenses incurred on the principal's behalf. If additional compensation is to be authorized, the principal must initial the provided space; however, the actual authority to compensate must be contained in the Statutory Major Gifts Rider.

The last definition, sixteen, explains that “third party” means a financial institution or a person.

Creation and Effective Date of a Power of Attorney. A Power of Attorney must be signed by a principal who has capacity, and the signature must be acknowledged. The law now requires the signature of the agent, whose signature also must be acknowledged. The agent need not sign at the same time as the principal, but the Power of Attorney is not valid until the agent signs. The statute does provide that the Power of Attorney is valid even if the principal becomes incapacitated in the lapse of time between the principal's signature and the agent's signature.

Multiple Agents. If more than one agent is designated, the Power of Attorney becomes effective only when all agents have signed and have their signatures acknowledged. As with a single agent, the power of attorney is valid even if the principal becomes incapacitated during the lapse of time between the principal's signature and the signature of the last designated agent to sign.

Assumption of Durability. The statute provides that a Power of Attorney is durable unless it expressly provides for termination upon the incapacity of the principal.

Caution to Principal. One of the additional requirements for a valid Power of Attorney is that the exact language contained in Gen. Oblig. L. §5-1513. This section is the statutory short form Power of Attorney. The opening paragraphs are entitled “Caution to the Principal.” These paragraphs explain the authority granted to the agent. It also informs the principal that information can be requested from the agent at any time and that the principal does not give up his or her own authority even as to those matters he or she authorizes the agent to perform. The caution is followed by a box to be initialed only if there are multiple agents and the principal wants them to act separately. If this box is not initialed, all agents must act together.

If agents must act together, there are the obvious issues of geography and availability, which issues should be explained to the client.

Successor Agents. The principal is able to designate one or more successor agents. The principal must once again initial if the successor agents may act separately.

Important Information for the Agent. Above the agent's signature line are several paragraphs that advise the agent or agents of their fiduciary responsibility. There is a warning not to comingle funds, to act in the principal's best interest and to keep records of all receipts, payments and transactions. This is followed by a caution against using the principal's assets to benefit the agent, or to make major gifts to him or herself unless the principal has specifically authorized that authority.

Self Gifting Statutory Error. As part of the caution to the agent regarding self gifting, the language of the statute is “... unless the principal has specifically granted you that authority in this Power of Attorney or in a Statutory Major Gift Rider attached to this Power of Attorney.” It is not statutorily possible for a principal to authorize major self gifting in the Power of Attorney. This may only be done in the Statutory Major Gifts Rider. When the statute authorizes such acts if the principal granted the authority in the Power of Attorney or in the Statutory Major Gifts Rider, the language conflicts with the provisions of Gen. Oblig. L. §§5-1514 and 5-1501 definition 14.

Execution of Power of Attorney and Major Gifts Rider. When a principal intends to authorize major gifting it is necessary that he/she execute both the statutory short form modified Power of Attorney and the Statutory Major Gifts Rider. These two documents must be signed “simultaneously” by the principal. The agent need not sign the Power of Attorney at the same time as the principal. The agent does not sign the Major Gifts Rider.²

Statutory Major Gifts Rider. The principal must initial the modification box that “authorizes” the agent to make gifts and transfers. The principal must then execute both the Power of Attorney and the Major Gifts Rider. Once executed and acknowledged, the Major Gifts Rider must be witnessed by two disinterested witnesses who are not a “permissible recipient of major gifts.” The agent need not be present and no agent signs the Major Gifts Rider. The agent must sign the Powers of Attorney, but not necessarily at the same time or place as the principal.

The Major Gifts Rider can authorize gifts in unlimited amounts. Beyond straight gifts, the statute goes on to authorize a multitude of transactions, some of which were formerly part of the statutory short form Power of Attorney.

Some examples of these transactions relate to the opening or modifying of joint accounts and Totten Trusts and the authority to create, amend, revoke or terminate inter vivos trusts.

The statutory language of the Major Gifts Rider must be used. The powers may be modified. Powers can be deleted or added, as long as additions relate to major gift transactions and other transfers.³

Springing Powers of Attorney. The springing power of attorney continues to be permitted. Proving that the “springing event” has occurred has been made easier in the statute, provided that the power of attorney requires a person or persons to declare in writing that the springing event has occurred. The written statement signed by the designated persons “satisfies the requirement of this paragraph without regard to whether the specified contingency has occurred.” Considering how broad the statutory language is, it may be less difficult to prove that a springing power of attorney is in effect. Much will still depend on the test or standard used in the power of attorney.

Charitable Gifts. Formerly, an agent could be authorized to fulfill and continue pledges made by the principal. This included organizations and charities. There was no dollar limit in the statute. The current law makes specific reference to continue gifts that the principal customarily made to individuals and charitable organizations. The statute limits the amount that can be gifted to such individuals or charitable organization to a maximum of five hundred ($500) dollars during any calendar year.

Medical Records. For the first time, an agent can be authorized to access medical records, and make decisions regarding payment for the health care provided to the principal. The statute goes on to designate such agent as a HIPAA agent for the principal.⁴

All Other Matters. The enumerated powers in the statutory short form Power of Attorney has and still does contain a power designated as “All Other Matters.” In spite of some efforts to expand this power as a catch all, its use especially as to gifts has been limited by the courts. The legislature has placed a statutory limit on the use of this power. An agent may not rely on this power to designate a third party as an agent.⁵ Such authority is possible only if specifically authorized by the principal.

Non-Statutory Power of Attorney. Throughout the statute there are references to various powers that can be granted to an agent, by using a Major Gifts Rider attached to a statutory short form Power of Attorney, or in a non-statutory Power of Attorney duly executed by the principal, including an acknowledgement of the signature.

This does not authorize an individual to grant gifting authority to an agent without the use of a Major Gifts Rider. Gen. Oblig. L. §5-1501B4 authorizes the use of the non-statutory Power of Attorney by “... a person other than an individual as the term person is defined in §5-1501 of this title.”

Gen. Oblig. L. §5-1501-9 defines person as an individual acting for him or herself. Such individual is statutorily barred from validly using a non-statutory Power of Attorney to accomplish major gifting. Gen. Oblig. L. §5-1501 goes on to include in the “person” definition, an official of any legal, governmental or commercial entity. The definition goes on to include various commercial and government entities. The legislature authorized these entities to operate including fund transfers without running afoul of the General Obligations Law. The carve out contained in Gen. Obl. L. §5-1504-B4 accomplished this, while excluding private individuals from the carve out.

Acceptance of Statutory Short Form Power of Attorney. Gen. Oblig. L. §5-1504-1 provides that “no third party located in this state shall refuse, without reasonable cause to honor a statutory short form Power of Attorney properly executed ...” Gen. Oblig. L. §5-1501-16 defines “third party” as a financial institution or a person. The definition of financial institution can be found at Gen. Oblig. L. §5-1501-5, which covers all banks, savings and loan associations, public pension funds, credit unions, security firms and dealers and insurance companies.

Reasonable Cause for Refusing to Honor. The statute provides nine examples

of reasonable cause for refusing to honor a Power of Attorney:⁶

1) refusal of the agent to provide an original or certified copy of the Power of Attorney;

2) the refusing third party had made a good faith referral of the principal and the agent to the local adult protective services unit;

3) actual knowledge of a report having been made to Adult Protective Services, regarding abuse by the agent;

4) actual knowledge, or having a reasonable basis for believing that the principal was dead;

5) actual knowledge or reasonable belief that the principal is incapacitated provided the Power of Attorney is not durable;

6) actual knowledge or reasonable belief that the principal was incapacitated when the Power of Attorney was executed;

7) actual knowledge or reasonable belief that the Power of Attorney was obtained by fraud, duress, or undue influence;

8) actual notice of the termination or revocation of the Power of Attorney; and

9) the refusal of a title company to underwrite title insurance for a transfer of real property made pursuant to a Major Gifts Rider.

Unreasonable Refusal to Honor: Gen. Oblig. L. §5-1504b prohibits a refusal to honor based solely on:

1) the Power of Attorney is not on a form prescribed by the third party. Banks can no longer refuse to honor a valid Power of Attorney and force the use of the bank form;

2) there has been a lapse of time since the execution of the Power of Attorney. The third party to whom the Power of Attorney is presented can insist on the completion of an affidavit that the Power of Attorney is in full force and effect, without being deemed unreasonable; and

3) there is a lapse of time between the signature of the principal and the signature of the agent.

Special Proceeding Remedy For Unreasonable Refusal To Honor. Gen. Oblig. L. §5-1504(2) provides that it shall be unlawful for a third party to unreasonably refuse to honor a properly executed statutory short form Power of Attorney, including one supplemented by a statutory Major Gifts Rider, or a statutory short form Power of Attorney, properly executed in accordance with the laws in effect at the time of execution. This law covers both old and new Powers of Attorney.

“A Special Proceeding as authorized by §5-1510 of this title shall be the exclusive remedy for a violation of this section”

Limiting relief to a Special Proceeding is a diminution of the remedies available before the 2009 amendments to the law. The old law permitted one aggrieved person to sue for damages and to seek injunctive relief. The law also authorized the payment of attorney's fees, costs and expenses of the action to a prevailing plaintiff. These remedies no longer exist in the 2009 amended General Obligations Law.

A Special Proceeding can also be commenced to:

1) determine the validity of the Power of Attorney;

2) determine capacity of principal at time of execution;

3) determine whether Power of Attorney was obtained through duress, fraud or undue influence;

4) determine the compensation to the agent;

5) to approve the record of receipts, disbursements and transaction by the agent;

6) to remove an agent who is unfit, unable or unwilling to perform the fiduciary duties or has violated such duty;

7) determine how multiple agents must act -- jointly or separately;

8) to interpret provisions in the Power of Attorney. This should include a Major Gifts Rider, because when executed the Power of Attorney and the Major Gifts Rider are considered a single instrument;

9) to compel the acceptance of the Power of Attorney. The relief that can be granted is limited to an order compelling acceptance. An agent seeking court approval to resign may also use a special proceeding.

Who May Commence A Special Proceeding. A special proceeding may be commenced by the agent, the spouse, child or parent of the principal, the principal's successor in interest, or any third party who may be required to accept a Power of Attorney.⁷

Termination or Revocation of Power of Attorney. A Power of Attorney may be revoked by the Court in a Special Proceeding, in which event the agent can be directed to account for all transactions and to deliver all of the principal's property and records to a successor agent, a government entity or a legal representative of the principal.⁸

Termination of a Power of Attorney occurs when:

1) the principal dies;

2) the principal of a Non-Durable Power of Attorney becomes incapacitated;

3) the principal revokes the Power of Attorney

4) the principal revokes the agent's authority, and there is no co-agent or successor agent or one who is willing or able to serve;

5) the agent dies and there is no co-agent or successor agent, or one who is willing or able to act;

6) the authority of the agent terminates, and there is no co-agent or successor agent, or one who is willing or able to act;

7) the purpose of the Power of Attorney is accomplished;

8) a court order revokes the Power of Attorney pursuant to Gen. Oblig. L. §5-1510 or §81.29 of the Mental Hygiene Law (Guardianship).⁹

Termination or Revocation of Agent's Authority. An agent's authority terminates when:

1) the principal revokes the agent's authority;

2) the agent dies, becomes incapacitated or resigns;

3) if the agent is a spouse and the marriage is terminated by divorce, annulment, or marriage is declared a nullity. The agency is revived if the parties remarry. A principal can override this revocation by an express provision in the Power of Attorney to the contrary; and

4) the Power of Attorney terminates by it’s own terms.¹⁰

Procedure for Terminating Power of Attorney.

1) a principal may revoke a Power of Attorney in accordance with the terms of the Power of Attorney;

2) by delivering a written, signed and dated revocation to:

a) the agent, and the agent must comply, notwithstanding the actual or perceived incapacity of the principal, unless the principal is the subject of an Article 81 Guardianship; and

b) To any third party that the principal has reason to believe has received, retained or acted upon the Power of Attorney.

If the Power of Attorney has been recorded pursuant to §294 of the Real Property Law, a written revocation must be recorded pursuant to §326 of the Real Property Law.

Effect of Revocation of Third Parties. A third party must have actual notice of the revocation for it to be effective, even if the revocation has been recorded. Recording is not actual notice.

Termination of the agent's authority is not effective as to any third party who has not received actual notice, and who acts in good faith under the Power of Attorney. Any good faith acts so taken will be binding on the principal and successors in interest.

A financial institution is deemed to have actual notice after it has had a “reasonable opportunity” to act on a written notice of the revocation or termination, received at its office where an account is located.

By executing a new Power of Attorney a principal revokes any and all prior Powers of Attorney, unless the principal expressly provides otherwise.¹¹

Powers of Attorney Executed in other Jurisdictions. Powers of Attorney executed in another state or jurisdiction in accordance with the laws of that state or jurisdiction or in accordance with laws of this state is valid in this state, regardless of whether the principal is a domiciliary of this state.¹²

Statutory forms for the short form Power of Attorney and for the Major Gifts Rider are contained within the statute.¹³

Unfortunately there is no statutory form for a revocation or termination of a Power of Attorney.

We will see if the changes made under the new statute are more protective of the Principal (the person who creates the Durable Power of Attorney).

©September 2009 Vincent J. Russo & Marvin Rachlin