Speak to your New York estate planning lawyer and you will find out that The Durable General Power of Attorney (known as the “POA”) is a vital tool for families in New York who are caring for an elderly or disabled relative, especially when cognitive impairment and dementia is an issue. The Power of Attorney is a highly recommended tool which allows the disabled individual to appoint a surrogate to make legal and financial decisions when they are unable to do so themselves. The word “power” in the title of the document clearly indicates that this is a legal tool to be taken very seriously. A Power of Attorney allows the appointed agent to perform many legal and financial functions for the grantor, including such tasks as: banking, insurance, real estate, taxes, business, stocks, bonds, safe deposit boxes, and retirement accounts (you can work with your estate lawyer to tailor your Power Of Attorney to suit your specific needs). The agent under a POA can handle and appoint a successor agent. This broad range of abilities has led to abuse, putting the frailest and neediest at risk. In order to reduce the incidence of fraud or misuse of the Power of Attorney, NY State introduced a new Power of Attorney document effective September 1, 2009. The new law provides new safeguards and options. Please note, anyone who has executed a Power of Attorney using the prior NYS form does not have to be concerned that their existing Power of Attorney will no longer be valid. All POA’s signed before September 1, 2009 will still be valid and accepted. After September 1, 2009 the following new features must be included in the NYS Power of Attorney in order to be accepted by financial institutions within the state. The changes to be implemented are as outlined below:
- A Power of Attorney may be executed by anyone over the age of 18and will be considered “durable” unless noted otherwise.
- In order for the POA to be valid, the grantor must sign the document before a notary, and the appointed agents must also sign before a notary thus accepting the position as the agent. The document is unusable until the agent signs to accept. A lapse in time between the signing of both parties will not invalidate the power even if the grantor becomes incapacitated before the agent signs the form. The logistics of getting all the required signatures becomes very important.
- Gifting powersare separated in a special “gifting rider” in the new Power of Attorney. In the prior document, the power to make gifts was one of the many listed powers. The gift was limited to the amount exempt for federal gift tax purposes and the language limited the gifts to a certain group including spouse, children and descendants. The prior form did not include gifts to the appointed agent. The new gift rider acknowledges that gifting could fundamentally change the grantor’s estate plan and specifically outlines options for gifting. The rider notes that in granting these powers to the agent it could “significantly reduce your property or change how your property is distributed at death.” Because of the seriousness of this power it must not only be notarized but also signed by two witnesses. This gives the Power of Attorney the same weight as a Will as it would have the same ability to change one’s estate plan. The rider also expands the amount of the gift to any amount and allows gifting to the agent with a caution that the agent must act in the best interest of the grantor. The rider gives the grantor the opportunity to give instructions about the gifts and their purpose.
- Special Powers are also included in the updated form. Specific mention of health care and billing payment has been added to records and reports, this allows access to health records and complies with strict HIPAA requirement. In addition to the powers found in the prior form, insurance companies, family, government, civil and military benefits are now mentioned and directed to accept the Power of Attorney.
- Changes affecting the appointed agent include establishing compensation for the agent and the introduction of a “Monitor.” For the first time the law states that agents may be paid for the services provided under the Power of Attorney. The payment is not fixed but described as “reasonable reimbursement for expenses and services rendered.” In drafting the Powers of Attorney, the grantor now must decided whether to pay the agent and at what rate. The agent must declare this compensation as taxable income. This could have a Medicaid impact as compensation to an agent under a Power of Attorney would not be considered a transfer.
- The grantor may appoint a Monitor to act as an optional safeguard. The Monitor is an appointed individual who would receive a copy of the Power of Attorney and could request all records of transactions made using the Power of Attorney. This should be carefully considered in creating the new Power of Attorney, and may cause some grantors to amend their present document to include this option.
- Instructions to the Agent: An estate planning tool such as Power of Attorney remains revocable and the new power specifically outlines the following procedures: a written format for revocation, the need to act according to the grantor’s instructions, a caution to avoid conflicts of interest, direction to keep good records of all transactions, payments and receipts, instructions to clearly identify yourself as an agent when signing, and finally a rule stating a good fiduciary never commingles assets with the grantor. The standard of care for the agent is the “prudent person’s standard of care” and the agent may be liable for any acts or omissions not in the grantor’s best interest. This appointment is given seriousness and weight.
- Acceptance of the Power of Attorney: Banks, financial institutions and other parties must accept the Power of Attorney if the statutory form is used and properly executed. This includes the Statutory Major Gifts Rider. The new law specifically focuses on having the New York State form be universally accepted by all sources in order to eliminate the need to execute multiple copies of the documents to satisfy the requirement of each individual financial institution.In general, the Power of Attorney is a vital tool in long-term care and financial planning. The September 1, 2009 revision both strengthens the appointed agent’s ability to effectively use this document for the grantor’s needs, while protecting their individual’s rights and financial well being. Consult with an experienced New York estate planning lawyer before signing this most useful legal tool.