The 2021 New York Statutory Power of Attorney
What is the Effective Date?
Beginning on June 13, 2021, Power of Attorney forms should follow the new statutory form and are subject to the new rules regarding execution and formatting. Powers of Attorney signed before June 13, 2021, using the old form, are still valid. They are not required to follow the new execution and formatting standards.
What is a New York Power of Attorney?
Generally, a Power of Attorney (POA) allows one person (a principal) to appoint someone else (an agent) to handle his or her personal and financial affairs. Powers of Attorney in New York can be statutory or non-statutory.
A statutory POA follows the form outlined in the New York General Obligations Law Section 5- 1513 (the statutory form). A non-statutory POA does not meet the requirements of Section 5-1513 and will not receive all the enforcement protections discussed under “Recognition and Enforcement of the Agent’s Authority” below. The law has been amended to state that a POA may follow the statutory form, but does not have to follow the statutory form, to be considered a valid and effective POA.
Recommendation: If possible, follow the statutory form. Deviations from the statutory form will only create headaches for third parties asked to accept an agent’s authority and as a result, may not be accepted.
Validity of the Power of Attorney vs. Proper Exercise of the Agent’s Authority
The validity of the POA is a separate concept from the authority granted by the POA. Validity determines whether a third party is required to accept the document. It gets the agent in the door and grants them the ability to work with the principal’s assets. Proper witnessing and notarization, as well as following the new substantial compliance standard discussed below, makes a statutory POA valid.
Proper exercise of the agent’s authority determines whether the agent’s actions are authorized under a valid POA. If an agent is able to use the principal’s assets in a way that was not allowed by the POA, the action may not be legally recognized, and the agent may be liable to the principal for misuse of his or her authority as agent.
Example: Jim signs a POA before a Notary and two witnesses naming his daughter Sally as the agent. The POA meets the written requirements of Section 5-1513. It is a valid POA. Sally takes the POA to a local bank where Jim has a checking account and presents it to a bank officer. The bank officer creates new signature cards for the account and marks that Sally is an agent under the POA. Sally now has authority over the account with the ability to sign checks.
Two months later, Sally writes a check from Jim’s account in the amount of $16,000.00 to George, who is a longtime friend of Jim, to buy a boat. The POA does not contain language giving an agent the right to make gifts from Jim’s assets.
Although the POA gave Sally the power to write the check and transfer the funds, she misused her authority because the POA did not give her the power to make gifts. Sally will be liable to Jim for the amount of the gift.
The Demise of the Exact Language Requirement
(NY GOL §5-1501(n) & §5-1501B(2))
Under the previous law, POA’s had to follow the statutory form down to a specific font and font size to be considered a valid statutory POA. This was known as the exact language requirement. Following the exact language requirement was important because a statutory POA granted extensive powers to agents as provided in state law, without specification of those powers required in the actual document signed by the principal. In addition, a statutory POA was enforceable by the agent if a third party refused to accept the agent’s authority.
Previously, companies refused to recognize an agent’s authority when the POA did not mirror the statutory form, causing huge inconvenience and expense if the principal was unable to sign a new POA, and possibly creating the need for a guardianship proceeding.
Under the new law, statutory POA’s must substantially conform to the format provided in section 5-1513 (the statutory form) to be valid. A document will substantially conform (and be a valid statutory POA) despite the following differences from the statutory form:
- Deleting portions of the statutory form that are optional and replacing them with the words “Intentionally Omitted.”
◦ Optional sections include (1) designating successor agents, (2) modifications, (3) designation of monitors, and (4) certain gift transactions.
2. Insignificant mistakes in wording, spelling, punctuation, or formatting.
3. Using bold or italicized fonts.
4. Differences in phrasing or language from the statutory form.
5. Deleting clauses present in the statutory form.
6. Insubstantial variation in the “Caution to the Principal” and “Important Information for the Agent” sections.
Recommendation: Although highly modified POAs going forward will still be valid, drafters should continue using the statutory form and make all changes under “modifications”. Instead of deleting the optional sections, writing “Not Applicable” under each section serves the same purpose and will not cause third parties to wonder why the section is missing from the document and question the agent’s authority.