Recent Changes to Power of Attorney Law in New York

A power of attorney is a legal document executed by the principal authorizing the agent to act on behalf of the principal. The actions an agent can do on behalf of the principal depend on the acts authorized by the principal in the power of attorney document. It can be limited to only one type of transaction (i.e., real estate transactions) or it can range to two or more or all types of transactions (i.e., chattel and goods transactions, bond, share, and commodity transactions, banking transactions).

The New York statutory form of the power of attorney is generally a durable power of attorney, unless it is modified under the modifications portion. As such, if there are no modifications, a New York power of attorney is a durable power of attorney that endures even after the principal loses capacity. When the principal loses capacity, the power of attorney continues and the principal cannot revoke the power of attorney. Only a court can revoke a durable power of attorney of a principal that has lost capacity.

The statute was amended by Governor Cuomo on December 15, 2020, effective 180 days after signing. Sometime in June 2021, the following changes were made effective:

Elimination of Separate Gifts Rider for Some Types of Gifts

With the new amendments, agents are already authorized to give up to $5000 without any modifications. There is no need anymore to execute a separate statutory gifts rider. If you want to increase the authority to give gifts, you can simply increase this authority under the modifications portion of the power of attorney.

Substantial Compliance with Statutory Form

Previously, institutions would decline a power of attorney if there were deviations from the exact wording of the statutory form. Even a misplaced comma or period could lead to a rejection of a power of attorney. For this reason, the new amendments allowed the acceptance of a power of attorney that had substantial deviations from the statutory form, for as long as there was substantial compliance.

Requires Two Witnesses and a Notary

The old law required a power of attorney to be executed in the same form as a deed. This only required a notary. However, the new amendments required a power of attorney to be executed before two witnesses and a notary. A notary can act as a witness.

Damages for Unreasonable Refusal to Recognize a Validly Executed POA

The new law grants the court authority to award damages, including reasonable attorneys’ fees and costs, if such institution unreasonably refuses to accept a properly executed POA.

Safe Harbor for Third Parties Acting in Good Faith

Lastly, the amendments allow third parties who rely on the POA in good faith to be held harmless and free from liability.

Although there is a statutory form for the power of attorney, the assistance of counsel in drafting one is necessary, especially when you would like to have modifications, ensure that your agent will be faithful to his fiduciary duties, and you want to be aware of the consequences of your actions. Should you need assistance in POA drafting, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York City, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].

The Pre-2021 Statutory Gifts Rider Problem

The old structure that the 2021 amendments addressed had specific problems. Under the prior law, the standard power of attorney form did not by itself authorize the agent to make gifts. To authorize gifting, the principal had to execute a separate document called the Statutory Gifts Rider. The Rider was technically separate from the main power of attorney and required its own witnesses, notarization, and specific language.

Many powers of attorney signed under the old law lack a Statutory Gifts Rider. As a result, the agents named in those documents cannot make gifts — even small gifts that the principal would have wanted to authorize — without going back and executing a separate Rider. For elderly or incapacitated principals, this often becomes impossible.

The 2021 amendments addressed the problem prospectively by integrating gifting authority into the main statutory form. Existing powers of attorney signed under the old law remain valid, but they still have the Statutory Gifts Rider limitation if no Rider was signed.

The Two-Witness Requirement

The addition of the two-witness requirement (in addition to the notary) is one of the more practical changes. The witnesses must be present at the signing, must not be the agent, and must sign the document themselves. The notary can serve as one of the two witnesses.

The witness requirement provides additional protection against fraud and forgery. Two witnesses observing the signing make it harder to challenge the document later. The requirement parallels the formality of will execution and reflects the recognition that powers of attorney can have major financial consequences.

The Substantial Compliance Standard

The substantial compliance standard is one of the most user-friendly aspects of the 2021 amendments. Under the old law, courts and institutions sometimes rejected powers of attorney for trivial deviations from the statutory form. A misplaced comma, an extra word, a slight reformatting — any of these could be used as a basis for rejection.

The new law requires only substantial compliance. The document is valid if it follows the statutory form in substance, even if there are minor formatting or wording deviations. The change reflects practical reality: most powers of attorney are prepared from word-processing templates that may have minor variations from the exact statutory form, and rejecting documents for these variations does not serve any real protective purpose.

Penalties for Unreasonable Refusal

One of the most consequential changes for principals and agents is the new sanction against institutions that unreasonably refuse to accept properly executed powers. Under the new law, a court can award damages including attorney's fees and costs if an institution refuses without good cause to accept a properly executed POA.

This provision addresses a longstanding frustration with the old law. Banks and other institutions sometimes refused powers of attorney for reasons that had nothing to do with the validity of the document — preferring their own internal forms, requiring fresh notarization, or simply declining to process unfamiliar documents. The new penalty creates real consequences for these refusals.

To take advantage of this protection, the principal or agent typically:

• Presents the POA to the institution with a written demand for acceptance.
• Provides any reasonable additional documentation the institution requests.
• If the institution still refuses without good cause, sends a follow-up letter citing the new law and warning of court action.
• If refusal continues, files a special proceeding to compel acceptance with damages.

The Good Faith Safe Harbor

Balancing the penalty for unreasonable refusal, the new law also protects institutions that act in good faith. An institution that accepts and relies on a POA in good faith is generally protected from liability if the document turns out to be defective or if the agent exceeds their authority. This protection encourages institutions to accept powers of attorney without excessive due diligence.

The good-faith safe harbor and the unreasonable-refusal penalty work together. Institutions that accept POAs reasonably are protected. Institutions that refuse POAs unreasonably face damages. The result is a balanced framework that promotes the practical utility of powers of attorney.

Practical Steps for Updating Old POAs

For principals who have powers of attorney signed under the old law, several practical considerations apply:

• Old POAs remain valid. The 2021 amendments did not invalidate POAs signed under the prior law. Pre-existing documents continue to function.
• Statutory Gifts Riders. If the old POA lacks a Statutory Gifts Rider and the principal wants to authorize gifting, executing a new POA under the current law is the simplest path.
• Capacity concerns. If the principal is approaching incapacity, executing a new POA now is preferable to risking that the principal lacks capacity later when an update would be needed.
• Family communication. Tell the agent and other family members about the new POA so they know which document is current.
• Storage. Multiple originals are useful because institutions sometimes keep the original on file.