By Anthony J. Enea, Esq.*
At first glance the one obvious difference between the old durable power of attorney form and the new form which becomes effective on September 1, 2009 is the longer length of the new form. A link to the new statute and the new power of attorney form and statutory major gifts rider can be found at www.westchesterseniors.com.
Beyond this obvious difference, the major distinction, in my opinion, is that the new form poses significant execution problems, especially for seniors. Additionally, the drafters appear to have had little concern for the difficulties most small and solo practitioners have in obtaining witnesses for the execution of documents. In their zeal to protect the elderly from financial abuse, the drafters may have gone overboard and created a document that is so complicated and so difficult to execute that it may end up being underutilized. In fact, at a recent seminar a prominent attorney suggested that he is strongly considering recommending to his clients that they execute and fund a revocable living trust to avoid the complexities of the new form, as well as the persistent problems associated with recognition and acceptance of powers of attorney by financial institutions and banks.
I will attempt to highlight for you what I believe are some of the most important aspects/provisions of the new form which necessitate your attention:
(a) The form must be in 12 point font;
(b) If more than one agent is designated they must act together unless the principal initials the box permitting the agents to act separately;
(c) If successor agents are designated they must act together unless the principal initials the box permitting the successor agents to act separately;
(d) The execution of the new form automatically revokes any and all prior powers of attorney executed by the principal, unless otherwise stated in the
"Modifications" section of the form. This would include any banking and financial institution powers of attorney ("POA") previously executed by the principal. I would strongly recommend that you address this issue with the principal, and provide for it in the "modifications" section of the form. It should be noted that there are several bills presently pending, A.8392 and S.5589 which propose technical amendments to the new form with respect to the revocation or termination of the POA. It is not likely that these technical amendments will be enacted before the new form becomes effective on September 1, 2009.
(e) Part F of the form relevant to the "grant of authority" to the agent(s) with letters "A" through "P" having a separate matter assigned to each letter listed, permits the principal to either initial each box he or she wants to grant the specific power/authority or to initial letter "P" which lists the letters for the matters, identified as "A" through "O" for which authority is to be granted.
Letter "M" of the old form as you may recall previously contained a gifting provision. No gifting provisions are contained within letters "A" through "P" of the form, with the exception that letter "I" relevant to "personal and family maintenance" allows the agent to continue making gifts the principal made to individuals and charities prior to the POA being signed, in an amount not to exceed $500 per recipient in any one calendar year.
Letters "A" through "P" of the form should not be modified in any way, shape or form. I also do not believe additional lettered matters should be added in Part F beyond letter "P". For an explanation of each of the powers granted see General Obligations Law §5-1502 A through General Obligations Law §5-1502 O.
(f) Part G of the form is the section which permits the principal to state any "modifications" to the authority granted in letters "A" through "O" of part F of the form. However, it is important to note that any "modifications" stated in part G of the form should not be provisions which allow the agent(s) to make gifts of the principal's assets or change the principal's interest in property. Any gifting other than the minimal gifting provided for in letter "I" of the powers must be provided for in the Statutory Major Gifts Rider ("SMGR"). For example, in the modifications section you could provide that the execution of this POA does not revoke a prior banking or financial institution POA. You could also define the "reasonable compensation" you would like the agent to receive or perhaps limit the powers of a "monitor". This is also the section where many elder law planning techniques can be provided for, such as entering into a personal service contract. As long as the modifications do not involve gifts of the principal's assets or changes to his or her interest in property they can be provided for in Part G of the form;
(g) If the principal wishes to allow the agent to make gifts in excess of the $500 provided for in letter "I" of the powers, he or she would need to both initial Part H of the form and complete and execute the SMGR;
(h) Part I of the new POA allows the agent to appoint a "monitor". The monitor could demand accountings by the agent, records and documents. The appointment of a monitor in the POA form would allow the monitor to obtain documents from third parties. If the principal appoints one family member as agent(s) and then appoints other family members as monitors, we may be leading our clients down a slippery slope that may detrimentally impact the agent's ability to act under the POA. It may be wise to specifically delineate the monitor's authority and the extent that he or she can seek and demand records. For example, you may wish to consider limiting the demand for records to once or twice per year.
The monitor(s) are also permitted to commence a lawsuit against the agent(s). See General Obligation Law §5-1509;
(i) Part J of the form provides that the agent(s) may be reimbursed for reasonable expenses incurred on the principal's behalf. If the principal wishes to allow the agent to receive "reasonable compensation", he or she must initial the box in Part J of the form. If the principal wishes to limit or define "reasonable compensation" he or she also can do so in the Part G modification section of the POA form.
As you can see the number of times the principal is required to place his or her initials has significantly increased from the old POA form. For many seniors this will be another hurdle to executing the new form.
(j) Part L of the form relates to the termination of the authority of the agent. Of course the POA terminates when the principal dies or becomes incapacitated if the POA is not durable. See GOL §5-1511. Under the new law as in the past, delivery of a written instrument to both the agent(s) and any third party who may have relied on the POA as to the revocation of a POA is sufficient notice of revocation. See GOL §5-1511(3);
(k) The new POA form must be dated and signed by the principal and acknowledged by the principal before a notary public;
(l) Part N of the form provides the agent with a statement of his or her legal obligations, duties and liabilities as an agent. It clearly places a significant burden and responsibility upon the agent for record keeping. In my opinion, the agent under the POA is now in a similar fiduciary position as the trustee of a trust. Part N of the form also places the attorney representing the Principal stet in the unenviable position of having to advise the agent that there may exist a potential conflict of interest, and that he or she may wish to seek separate legal counsel before executing the POA in Part O of the form. If the Agent does not obtain separate legal counsel, it may be necessary to obtain from him or her some written acknowledgement of the waiver of the potential conflict of interest and their decision not to retain counsel.
I believe a number of nominated agent(s) will decide that they don't want the responsibility of being an agent once they have read the notice provisions of the form and consulted with an attorney.
(m) In Part O of the form, the agent(s) must sign and have their signatures acknowledged before a notary public. Multiple agents do not need to sign at the same time and do not need to sign at the same time as the principal.
The new POA form is not valid until all of the agents have signed and had their signatures acknowledged before a notary public.
(n) The Statutory Major Gifts Rider (SMGR), see GOL §5-1514, must be executed simultaneously with the POA form by the principal. When both documents have been fully executed, they will then be read as one document.
Gifting under the SMGR will be authorized only if the principal has initialed Part H of the POA form. Clearly, the SMGR is intended to alert the principal of the gravity and importance of granting gifting powers to the agent(s), particularly if the agent(s) is to have the authority to gift to him or herself. However, when one analyzes both the execution requirements of the SMGR and the legislative provisions relevant to the powers enumerated in #"1" through "9" of the "modifications" section (Part B) of the SMGR, there are enough ambiguities and contradictions to devote a full day seminar to. In spite of this I have been able to gleam the following:
1. If the principal wishes to allow the agent to make gifts to others, including him or herself up to the federal annual gift tax exclusion ($13,000 for 2009) he or she will need to initial the box in Part A of the SMGR;
2. Part B of the SMGR must contain any "modifications" or expansion of the gifting powers the principal wishes to give to the agent(s), and the box in Part B must be initialed by the principal. The Part B modifications relate to any expansion or modification of the power of the agent to gift beyond the annual exclusion amount ($13,000) to third parties. The powers in Part B do not include the powers to the agent to gift to him or herself (emphasis added). That authority must be provided in Part C of the SMGR. The gifting to third parties in Part B can be unlimited or gifts of a specific amount. It appears sample modifications of the gifting powers that can be inserted in Part B can be found in §5-1514(3) of the GOL. It does not appear that GOL §-1514(3) limits the modifications that can be made, see GOL §5-1503. However, this is one area of ambiguity.
3. Part C of the SMGR has to be initialed by the principal if he or she wishes to grant the agent(s) the authority to gift to him or herself with the extent to or limitations therein stated.
Thus, it appears that the boxes in Part A, B and C of the SMGR will have to be initialed by the principal if he wishes to grant expanded gifting powers to the agent(s) with respect to third parties and him or herself, and that the modifications of said powers need to be clearly delineated therein.
4. The SMGR must be dated and signed by the principal with his or her signature acknowledged before a notary public (Part E of the SMGR);
5. The SMGR must be witnessed by two people who are not potential recipients of gifts under the SMGR. The witness' statement must indicate that they observed the principal sign the SMGR in their presence (Part F of SMGR); and
6. Part 6 of the SMGR must state the name and address of the SMGR's preparer.
As can be seen from the above the new POA form and SMGR have many complexities which must be carefully studied and analyzed. I wish you and your clients the best of luck in doing so.