On September 1, 2009 sweeping changes in New York’s power of attorney statute will become effective. Some sections were repealed outright; many sections were amended and quite a few new sections were added. The statutory short form has transmuted from a relatively simple 3 page form into a rather inscrutable nine page form. This form/law is now so complex that executing it without the direction of a lawyer, could cause the form to be null and void and/or totally ineffective.
Reverse mortgage loan originators and underwriters will be required to become familiar with the new form/law. Some of the changes are noted below. While the thrust of the law is to protect the principal, I believe that this law will have some unintended consequences. Where internecine warfare exists in the family unit, law suits as provided by the statute, will be plentiful.
To some, this law may look good on paper. However, I fear that it will create a nightmare in practice. Below we will look at some of the more salient changes and issues.
Agents, along with the principal, are now required to sign the form. Agents are also held to an even higher standard of care. The principal can also appoint a monitor to watch over the agent. The monitor could also bring an action or special proceeding, on 15 days notice, compelling the production of books, records, of receipts and expenditures. Such a proceeding can also be brought by a co or successor agent. Watch the family fights begin. Many believe that this higher standard of care will preclude many from serving as agents. The feeling being that it is just not worth it. Time will tell whether this fear will be realized.
Since the power does not become effective until the power is signed by both the principal and the agent(s), valuable time could be wasted when out of town children are appointed as c0-agents. Additionally, a child acting as a co-agent that does not want the parent to obtain a reverse mortgage can effectively prevent the power from taking effect. Therfore, it may be appropriate to choose just one agent rather than co agents.
Gift giving is severely limited by the new power. Gifts cannot be made unless the power is initialed by the principal and a statutory gift giving rider is executed with the formality of a will. This new form will require foresight and planning, especially when the children (agents) do not live close by.
Under this law, banks and brokerage firms must accept the power of attorney form. It is possible, due to its complexity, we may be seeing a sharp rise in revocable trusts. Also more guardianship proceedings may be brought because children may be counseled not to become an agent particularly when animosity exits in the family unit.
Any powers of attorney executed prior to 9/1/2009 will remain valid. Some of the new law provisions will spill over to these old prior executed powers: HIPPA rights-agent for purposes of bill paying can request medical billing information; agent standard of care and the right to bring a special proceeding are the more important and salient carry over features.
On the surface, the change in the General Obligations Law will make the execution of a power of attorney much more than a perfunctory exercise. It will become a solemn process that will require a lot of thought. Ostensibly, the new law attempts to prevent an agent from taking advantage of the principal. But the question remains: Can any legislative body legislate away greed and over reaching by another?
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