In this week’s New York Trusts and Estates blog entry, Sally M. Donahue discusses one of the many recent changes to the law regarding statutory short form Powers of Attorney, that change being the possible award of monetary damages, reasonable attorney’s fees and costs against a third party who is found to have acted unreasonably when it refused to honor the agent’s authority under a validly executed statutory Power of Attorney.
You did your estate planning. As part of it, you executed a Power of Attorney appointing an agent or agents you trust to handle the financial and legal affairs you designate in a document that comports with all the requirements of New York General Obligations Law. On June 12, 2021, your agent takes the document to your bank, so he or she can handle your banking transactions for you. The bank officer tells your agent that it will not accept the form. The proffered reason? Your document was validly executed, but the bank requires its customers to use the bank’s form. What was your recourse against the bank? Pretty much none.
Well, with the recent overhaul of Article 5, Title 15, of New York’s General Obligations Law, which governs short form Powers of Attorney, you are in luck. As of June 13, 2021, the effective date of the changes, under New York General Obligations Law Section 5-1510, the principal (the person acting for himself or herself who signs the Power of Attorney), the agent or agents named in the Power of Attorney, “the spouse, child or parent of the principal, the principal’s successor in interest, or any third party who may be required to accept a power of attorney” can commence a special proceeding in court for a number of reasons, one of which is to compel a third party, here the bank, to accept your Power of Attorney and the agent’s authority to act in your stead. Here comes the good part: If the court determines that the bank (or other third party) “acted unreasonably” when it refused to honor your Power of Attorney and, hence, your agent’s authority under it, the court may award damages, including reasonable attorney’s fees and costs (NY GOL § 5-1504[b]). Damages could be appreciable. For example, perhaps, your agent had been unable to access funds with which to timely pay your income taxes, resulting in interest and penalties, or even a tax audit. The remedy of damages, attorney’s fees and costs is available even if the Power of Attorney was executed prior to June 13, 2021, using an old form, so long as the form was proper and validly executed.
This change will give banks and other third parties something on which to chew.