Marta J. Paczkowska, Law Clerk at Cole Schotz, co-authored this blog.
On December 15, 2020, Governor Andrew Cuomo signed a bill into law that simplifies New York’s Power of Attorney form and implements penalties for improper rejection of a New York Power of Attorney by third parties.
The new law (A.5630-A/S.3923-A), which goes into effect in June 2021, amends New York General Obligations Law, Article 5, Title 15, as follows:
- In defining “Power of Attorney,” the law now explicitly includes both a statutory short form Power of Attorney and non-statutory Power of Attorney.
- A Power of Attorney no longer needs to exactly match the wording of the statutory short form, but now can substantially conform to the statutory short form. “Substantially conform” is defined as “us[ing] language that is essentially the same as, but is not identical to, the statutory form.”
- A Power of Attorney can be executed by either the principal or someone signing in the name of the principal, as long as that individual is someone other than the principal’s named agent or successor agent. The individual signing in the name of the principal must sign in the principal’s presence and at the principal’s direction.
- The Statutory Gifts Rider is eliminated and powers that were previously included in the Statutory Gifts Rider will now be stated in the “Modifications” section of a Power of Attorney.
- A third party is now permitted to accept and rely on a Power of Attorney that was allegedly acknowledged (i.e. notarized) even if (1) the signature on the Power of Attorney is not genuine, (2) the Power of Attorney is void, invalid, or terminated, (3) the purported agent’s authority is void, invalid, or terminated, or (4) the agent is improperly exercising his or her authority – as long as the third party does not have actual knowledge of these facts and relies on the Power of Attorney in good faith. A third party who is being asked to accept an acknowledged Power of Attorney may, however, request an agent’s certification of any factual matter, and an opinion of counsel as to any matter of law, concerning the Power of Attorney.
- Third parties are required, within ten (10) business days after being presented with an original or attorney certified copy of a Power of Attorney, to either (1) honor the Power of Attorney, (2) reject it in a writing that lays out the reasons for rejection, or (3) request the agent to execute an acknowledged affidavit stating that the Power of Attorney is in full force and effect. If the third party initially rejects the Power of Attorney and subsequently receives a written response, the third party must, within seven (7) business days after receiving the written response, either honor the Power of Attorney or reject it in a writing setting forth the reasons for the final rejection. Likewise, if the third party requests the agent to execute an acknowledged affidavit, the third party must honor the statutory short form Power of Attorney within seven (7) business days after receiving the acknowledged affidavit.
- A court may award damages, including reasonable attorney’s fees and costs, if a special proceeding is brought to compel a third party to honor a Power of Attorney and the court finds that the third party acted unreasonably in refusing to honor a properly executed Power of Attorney.
It is important to note that third parties must honor, and may not unreasonably reject, a Power of Attorney that was executed in accordance with the laws in effect at the time of its execution. As such, existing Powers of Attorney do not need to be re-executed at this time.
As the law continues to evolve on these matters, please note that this article is current as of date and time of publication and may not reflect subsequent developments. The content and interpretation of the issues addressed herein is subject to change. Cole Schotz P.C. disclaims any and all liability with respect to actions taken or not taken based on any or all of the contents of this publication to the fullest extent permitted by law. This is for general informational purposes and does not constitute legal advice or create an attorney-client relationship. Do not act or refrain from acting upon the information contained in this publication without obtaining legal, financial and tax advice. For further information, please do not hesitate to reach out to your firm contact or to any of the attorneys listed in this publication.