New York Power of Attorney: Will Recent Amendments Reduce the Risks of Elder Abuse and Fraud?

Amanda Cluff, Senior Editor, Albany Government Law Review Member

I. Background

One of the most prevalent concerns in both elder and healthcare law is the abuse of rights bestowed upon a durable power of attorney.[1] Numerous stories circulate daily regarding elderly persons who have been financially manipulated by individuals designated to this important role.  A power of attorney is defined as “a legal document through which a principal authorizes an agent [also known as an attorney in fact] to act on the principal’s behalf.”[2] This power usually terminates once the principal—the person who authorizes the power to an agent—becomes mentally incapacitated, or otherwise unable to exert decision-making abilities.[3]

However, when a durable power of attorney is created, the power of attorney continues to remain effective, even after such incapacity occurs.[4] This sort of power can be beneficial in several respects.  First, the durable power of attorney can replace an unfamiliar court-appointed guardian or conservator.[5] In addition, those who are given a durable power of attorney are able to make both personal and property decisions in the best interests of the principal, who lacks capacity to do so.[6] However, the danger of a durable power of attorney is also what makes it beneficial—the durable power of attorney is given virtually unconstrained and very broad authority to handle the principal’s financial affairs.[7] Consequently, this is a power that is difficult to monitor and, therefore, may be subject to various forms of abusive or fraudulent behavior by the agent.

II. Status of the 2009 Power of Attorney Law

On September 1, 2009, New York’s existing Power of Attorney Law[8] was amended extensively.  By altering the statutory requirements, legislators reasoned that they could “reduc[e] the risks of abuse and fraud in elderly care and the financial planning process.”[9] The changes included more detailed and comprehensive forms, the addition of specific language for power of attorney documents, the process for notarization of the signatures on the forms, and alterations in the revocation process.[10] One of the more prominent changes was in relation to gifting.  The Law requires that a Statutory Major Gifts Rider be filled out for all new agents, in order to guarantee that principals understand the extent of the powers they are giving to their agents.[11] These amendments were meant to provide more security and protection for “the elderly, and sometimes infirm individuals . . . [who may be] susceptible to signing such instruments without fully understanding their implications.”[12] Therefore, the 2009 Law emphasized the importance of defending those who are vulnerable to exploitation by the agent.

Although the 2009 amendments were only intended to affect the power of attorney in relation to estate planning and financial matters, they had inadvertent consequences for other areas of law.  Specifically, the new requirements governed all New York powers of attorney.[13] Of particular concern was that the statute’s stringent requirements would be burdensome on commercial and business transactions under the Law, as “the statute appeared to impose fiduciary duties on agents in areas where such duties are generally specifically excluded (e.g., UCC indorsements) or limited or nonexistent (e.g., transactions where the power is coupled with an interest).”[14] In addition, the Law enacted in 2009 created a general presumption that by signing over a new power of attorney, all of the powers of attorney that had been conferred previously were revoked unless expressly stated—a requirement that was particularly burdensome on any commercial or business transaction that involved a power of attorney.[15]

Concerned by the broad language of the Law and the unintended consequences that it created, the New York State Bar Association Power of Attorney Working Group and the Elder Law Section’s Ad Hoc Committee on the Power of Attorney convened to discuss this issue and to provide general “recommendations” to clarify the language of the Law.[16] These recommendations were fashioned to provide greater insight into the drafters’ intentions for the 2009 Power of Attorney Law and silence the controversy regarding which powers of attorney were affected.

III. The 2010 Amendments and Their Implications

On August 13, 2010, Governor Paterson signed into law the 2010 Amendments designed to “clean up” various aspects of the 2009 Power of Attorney Law.[17] The amendment was codified in a new section of the Law—Section 5-1501C—and applied retroactively from the Power of Attorney Law enacted on September 1, 2009.[18] Most importantly, the 2010 Amendments specifically named certain powers that were not intended to have been included in the 2009 Law and formally excluded them from its obligations.[19]

Some of the powers that are exempt from 2009 General Obligations Law Section 5-1501 include:  powers of attorney that concern commercial or business transactions, various forms of proxies, powers created by government entities or for a governmental purpose, powers for financial institutions to hold the assets for those who are bestowed the power, certain powers used in businesses (such as a corporation, limited liability company, or partnership), property managing agents, real estate brokers, and powers created by statute.[20] Through this amendment, the main concerns regarding “transactional attorneys advising [their] clients in the shareholder proxy process, SEC filings, state blue sky filings and other commercial transactions”[21] are deemed “exceptions”[22] to the 2009 Power of Attorney Law.

Furthermore, these amendments alter the existing Power of Attorney Law by specifying that the creation of a new power of attorney no longer entirely revokes all pre-existing powers of attorney.[23] Rather, the two powers can co-exist, and the previous power will not be revoked unless the person who executes the power of attorney explicitly authorizes such action.[24]

IV. Conclusion

The 2009 Power of Attorney Law primarily addressed the issue of abuse in the elder and healthcare systems.[25] By fashioning a new set of laws that address concerns such as power of attorney fraud and manipulation of those who are incapacitated, agents are now held more accountable when they act on the principal’s behalf as a fiduciary.[26]

However, the 2009 Law was ambiguous in many respects, particularly in that it governed all powers of attorney, including those in commercial and business transactions.[27]

Realizing that these limitations were particularly burdensome on those areas of law, legislators worked quickly to create amendments to address the Law’s unintended effects. [28] These amendments, retroactively effective, offered exclusions to the limitations of the 2009 Law, specifically, exemptions for commercial and business transactions as well as corrections to notarization and revocation ambiguities.[29] These new amendments will hopefully clarify and alleviate the widespread anxiety over the existing state of New York Power of Attorney Law. 


[1] See Hunton & Williams, New York Power of Attorney Law Amended (Aug. 2010), available at http://www.hunton.com/files/tbl_s10News/FileUpload44/17290/new_york_power_of_attorney.pdf.

[2] Lori A. Stiegel, Durable Power of Attorney Abuse: It’s a Crime Too, A National Center on Elder Abuse Fact Sheet for Criminal Justice Professionals, Nat’l Center on Elder Abuse 1 (2008), available at http://www.abanet.org/aging/about/pdfs/durable_poa_abuse_fact_sheet_criminal_justice_professionals.pdf.

[3] Id.

[4] Id. at 2.

[5] Id.

[6] Id.

[7] Id.

[8] N.Y. Gen. Oblig. Law § 5-1501 (McKinney 2006).

[9] New York State Amends Power of Attorney Law, Corp. & Sec. L. Blog (Sept. 2, 2010), available at http://www.corporatesecuritieslawblog.com/investigations-and-enforcements-new-york-state-amends-power-of-attorney-law.html.

[10] Id.; Hunton & Williams, supra note 1.

[11] Sarah B. Rebosa, The New Power of Attorney Statutory Major Gifts Rider, Rivkin Radler News & Events (Sept. 2009), available at http://www.rivkin.com/publications.cfm?id=307.

[12] Hunton & Williams, supra note 1.

[13] Skadden, Retroactive Amendments to New York’s Power of Attorney Law 1 (Sept. 9, 2010) available at http://www.skadden.com/eimages/_Retroactive_Amendments_to_New_Yorks_Power_of_Attorney_Law.pdf.

[14] Id.

[15] Chadbourne & Park, LLP, Client Alert: New York Amends Power of Attorney Law to Exclude Most Corporate Transactions 1 (Aug. 23, 2010), available at http://www.chadbourne.com/files/Publication/7b7fa516-00aa-47a4-b9be-5bba3d286056/Presentation/PublicationAttachment/7bab2e69-4d1e-47c6-b02a-b5e4035f37cc/Amendments%20to%20NY%20POA%20Law%20ca.pdf.

[16] Skadden, supra note 13; David Goldfarb, New York State Power of Attorney Law and Proposed Amendments, 20 Elder L. Att’y 3, 7 (2010), available at http://www.nysba.org/AM/Template.cfm?Section=Home&CONTENTID=40295&TEMPLATE=/CM/ContentDisplay.cfm.

[17] See Goldfarb, supra note 16.

[18] Id. at 7, 9.

[19] Id. at 7.

[20] Id.; see generally N.Y. Gen. Oblig. Law § 5-1501.

[21] New York State Amends Power of Attorney Law, supra note 9.

[22] Id.

[24] Id.

[25] Hunton & Williams, supra note 1.

[26] Stiegel, supra note 2, at 2.

[27] Hunton & Williams, supra note 1.

[28] Id.

[29] Goldfarb, supra note 16; see generally N.Y. Gen. Oblig. Law § 5-1501.


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