Durable Power of Attorney

The durable power of attorney is one of the most powerful planning tools that an attorney can recommend  to  a  client,  not  only  for  estate planning,  but  also  for  Medicaid  and  other public-benefits planning. When a person (the principal) signs a power of attorney, he gives another person (the agent) the power to act in his place and on his behalf in managing his assets and affairs.  The agent's powers may be broad and sweeping so as to include almost any act which the principal might have performed himself.

Aspects of the new law

At the beginning of 2009 the New York State Legislature approved and Governor Patterson signed into law legislation that dramatically changed the laws pertaining to powers of attorney. The changes were intended to stave off financial abuse of the elderly. Some of the changes are beneficial. Other changes may prove to be problematical.

The new power of attorney became effective on September 1, 2009.  All powers of attorney executed prior to that date remain valid.

In sharp contrast to the old power of attorney, the execution of a power of attorney by the principal alone is no longer adequate.  All new powers of attorney must be signed by both the principal and the agent and their signatures must be acknowledged before a notary public.

The new power of attorney law requires that the agent, in signing the power of attorney, acknowledge his legal responsibilities and keep detailed records of all receipts, transactions, etc.

The new law eliminates all gift-giving authority of the agent except to continue a principal's history of gift-giving, and then not to exceed $500 per person or charitable organization per year. (Legislation that would change this provision is pending.)

All other gift-giving may only be accomplished through a separate document, the Statutory Major Gifts Rider.   Using this supplemental form the principal "may authorize major gift transactions and other transfers." The form requires that it be acknowledged and witnessed by two disinterested witnesses.

Attorney participation recommended

At one time, a power of attorney was among the most straightforward and easily executable legal tools an attorney could recommend to a client.  A power of attorney granted to a trusted loved one or friend generally simply meant that a client (the principal) could be secure in the knowledge that if he was ever unable to act for himself, another person (an agent) could act on his behalf.

However, the new law's requirements are so complex that they virtually require that a principal have an attorney or  risk executing  a power of attorney which  is invalid or has unintended results. In fact, the new law recommends that the principal should have an attorney supervise the execution of a power of attorney, and particularly, the new Statutory Major Gifts Rider.

Using the durable power of attorney

A power of attorney can be either a "general" power of attorney, where the agent may perform almost any act the principal might have performed himself regarding the financial management of his affairs, or a "limited" power of attorney, where the agent has one or more specific powers, such as power to sell a particular property to a particular purchaser at a particular time.

A single principal may name one or more agents who can be authorized to act together or separately (alone without the signature of the other agent or agents).

In order to sign a power of attorney, the principal must have "capacity", which is defined by the statute as the "ability to comprehend the nature and consequences of the act of executing and granting, revoking, amending or modifying a power of attorney...."

All  powers of  attorney  under the  new  law  are  considered  "durable"  unless  the document expressly states otherwise.  That is, the power of attorney will endure the principal's incapacity unless it provides that it is a non-durable power of attorney to be terminated upon incapacity.

The  great  advantage  of  a  durable  power  of  attorney  is that it  remains  in  effect  after  the principal's incapacity. The agent, therefore, can act immediately upon the principal's incapacity to manage the principal's assets or to take various measures without initiating costly and time-consuming alternatives such as guardianships or trusts.

The power of attorney for asset management in the case of a seriously ill or disabled person is especially useful in situations where the person's assets may be modest and, accordingly, do not warrant the expense associated with other planning alternatives.

In a few states, the principal is allowed to delegate to the agent in the durable power of attorney various health-care powers in addition to control over financial matters.   In New York State, however, a health-care proxy must be a separate document from a power of attorney.



Need Acrobat? Click here to download your free version.