Lawyers: New York’s Power-of-Attorney laws Are Too Confusing

February 18, 2016 at 10:00 am Leave a comment

If you find New York’s Power of Attorney laws confusing-and judging by the number of questions  our erstwhile compliance department gets on the issue many of you do-you are not alone. Apparently so do many attorneys.  The good news is that the influential NYC Bar Association is proposing changes to simplify the POA process.  The bad news is that one of their solutions is to authorize the imposition of fines on financial institutions that refuse to accept POA’s.

Responding to high-profile examples of elder abuse, since 2008 the legislature has  made  several changes intended to make sure that an  agent is authorized to gift   money on behalf of a principal. Most importantly,  principals  must now  sign both a   power-of-attorney and  a separate  statutory gift rider in order  for agents  to be empowered to  gift  $500 or more on their behalf  (5-1514 General Obligations Law).   The Bar Association wants to reintroduce the use of a single form.   It also wants to make POA’s valid so long as the language used to create them “substantially conforms” to NY Law.

According to legal practitioners these forms have become traps for all but the most experienced attorneys: “Unless you practice in this area on a regular basis, you can’t get it right,” David Goldfarb, an attorney who helped come up with the proposed changes is quoted as saying in today’s NY Law Journal “Seventy-five to 80 percent of the powers of attorney done by lawyers who don’t specialize in this area, I’d say, have something in there that would cause it to be a problem.” (http://www.newyorklawjournal.com/id=1202749790544/State-Bar-Seeks-Changes-to-PowerofAttorney-Law#ixzz40WhalCGa)

Unfortunately, its most important proposal would authorize the imposition of fines on financial institutions that “unreasonably refuse to accept a properly executed Statutory Short Form Power of Attorney.” The Bar complains that it is all too common for financial institutions to refuse to accept valid POAs and that there is  a lack of uniformity among financial  institutions.

Remember it’s Already illegal to refuse to honor , without reasonable cause, a properly executed statutory short form power of attorney which is supplemented by a statutory gifts rider (N.Y. Gen. Oblig. Law § 5-1504 (McKinney).  In addition, while no sanctions can be imposed , NY has an expedited process that agents and financial institutions can use to resolve disputes about a form’s validity.

Recognizing that sanctions are a no-go for the financial services industry the Bar  is open to coupling sanctions authorization  with provisions holding a financial institution “ harmless if it, in good faith, accepts an acknowledged power-of-attorney without actual knowledge that the signature is not genuine.” They  would also be empowered to  “ ask the agent for his or her certification of any factual matter concerning the principal, agent, or power-of- attorney and an opinion of counsel as to any matter of law concerning the power-of- attorney.”

These changes should be seriously considered but without sanctions. Many credit unions already require POA’s to include a “hold harmless” provision before they accept them and I would suggest that credit unions are already within their rights to confirm that a person is legally acting as an agent before accepting a POA but codifying these standards is a good idea. But it makes little sense to acknowledge, as the Bar does,   that POA’s are liability traps for all but the most experienced attorneys  and then propose pressuring financial institutions into making quick decisions on the acceptance of documents where the wrong decision could literally wipeout a member’s savings. Here is a link to the proposal. http://www.nysba.org/WorkArea/DownloadAsset.aspx?id=61346

 

 

Entry filed under: Compliance, New York State, Regulatory. Tags: .

Guidelines for Cyber Information Sharing Released How MBL Changes will Impact Your CU

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Trackback this post  |  Subscribe to the comments via RSS Feed


Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

Enter your email address to subscribe to this blog and receive notifications of new posts by email.

Join 452 other followers

Archives