The Legislature's concern has always been that an agent might act improperly with the power granted in a power of attorney form. Prior to 1994, we used a form in which one of the specified powers indicated "all other matters." That simple phrase was used by many of us to do extensive Medicaid planning, which typically involved the gifting of large amounts of assets. It was also used to set up sophisticated trusts and in all manner of estate planning. In 1994 and then again in 1997, the Legislature modified the form to make it clearer that the principal was authorizing gifting by the agent. In earlier articles, I have warned against using the standard form because that form would limit gifting to the annual exclusion, which this year is $13,000. The form would actually limit the exclusion further by allowing the annual exclusion only to relatives. Typically, most elder-law attorneys would expand the form to allow the agent to make unlimited gifts so as to allow for the type of planning necessary when someone is faced with the expense of a medical catastrophe.

Among the numerous changes in the new form, the most significant is probably the addition of a separate document. Under the new law, the right of gifting will be on a separate document attached to the power of attorney. Only small gifts of $500 or less will be allowed without the separate document referred to as a "statutory major gift rider." The riser not only allows significant gifting, but also contains the provisions to "create, amend, revoke or terminate an inter vivos trust." Setting up accounts for or naming beneficiaries on accounts are also included in the rider, as well as the power to change a beneficiary on a retirement account. The new power of attorney needs to be signed, dated and notarized not only by the principal but also by the agent on the statutory major gifts rider. It also needs to be signed by two witnesses, just like a will. The document only becomes effective as of the date both the principal's and the agent's signature are witnessed and notarized.

The new law provides a specific obligation for the agent. Before, the obligation was implied; now it is spelled out. The agent must behave as "prudent person." They should keep good records and those records must be made available if there is a request from a monitor, co-agent, certain governmental entities, a court evaluator, a guardian or a representative of the principal's estate. The term monitor refers to a new provision of the law wherein the principal appointing the agent can name a monitor to request and receive records of transactions by the agent. The agent can be found liable for improper conduct.

One of the real benefits of the new law is that it makes it very clear that third parties must accept the document. Over the years, it has been a continual problem to get financial institutions to recognize a properly prepared document. Many financial institutions demand that their own form be executed and will indicate that after a particular time the document becomes stale, as if it were a donut. Under the new law, not only must banks accept the document but now security brokers, security dealers, security firms and insurance companies must also accept the standard New York State document, which does not become invalid unless it is specifically revoked by the principal, or on the principal's death. No longer can a third-party financial institution refuse to honor the standard power of attorney because it is not on their form, or because too much time has passed.

Powers of attorney executed prior to Sept. 1, 2009, will still be valid. Therefore, the financial institution official who snubs his nose at the old form, indicating that it no longer effective, will need to be put in his or her proper place. However, as a precaution, beware of the representative of the financial institution who advises that the old form is no longer valid, even though it was executed prior to the effective date of the new law. It has not been uncommon to receive this type of comment from the financial representative and a call to the institution from your attorney may be required.

Additionally, the new document allows the agent access to medical records. To be clear, the new power of attorney form does not allow the agent to make medical decisions, but the agent will have access to medical records. Most people who come to my office indicating that they already have a power of attorney are disappointed when I review it and find it inadequate. Under the new law, that has never been more likely to be true. The Legislature's concern has always been the protection of the principal from undue influence. Whether that goal has been achieved or another level of complexity has simply been added to what was originally a fairly standard document, remains to be seen.