Power of Attorney

What is the difference between a Durable Power of Attorney and a Non-Durable Power of Attorney?

A Power of Attorney is a document that allows someone to give authority to an individual that they choose to manage their legal and financial affairs on their behalf. The authority can be very specific to only certain transactions, standard to include the powers outlined in the statutory form, or it can be very broad and include provisions dealing with more complex matters such as trust planning, tax planning, and long-term care asset protection.

The key difference between a durable and non-durable power of attorney lies in what happens when the person who granted the power (the "principal") becomes incapacitated or mentally incompetent. A durable power of attorney remains in effect when the principal becomes incapacitated. A nondurable power of attorney is no longer in effect if the principal becomes incapacitated.

When signing a power of attorney for a limited transaction, such as representing you in the sale of real estate or assisting you with managing an investment, it is possible that you only want the individual to have authority while you have capacity and can call the shots. In this case, a “non-durable” power of attorney would serve your purpose. In the event you become incapacitated, your agent will no longer have authority to act on your behalf. 

However, if you are signing a power of attorney as part of your estate planning, to make sure that if you become incapacitated, the individual you appoint will have authority to act on your behalf, your power of attorney must be a “durable” power of attorney.

Durable Power of Attorney:

• Remains effective even if the principal becomes incapacitated or mentally incompetent
• Contains specific language stating it will survive the principal's incapacity (often called a "durability clause")
• Continues until the principal's death or until formally revoked while the principal is still competent
• Most commonly used for estate planning and long-term care planning purposes
• Essential for situations where someone may need ongoing financial or healthcare decision-making assistance

Non-Durable Power of Attorney:

• Automatically terminates if the principal becomes incapacitated or mentally incompetent
• Only remains valid while the principal maintains mental capacity
• Becomes void precisely when the principal would most need someone to act on their behalf
• Useful for specific, temporary situations when the principal is traveling or temporarily unavailable
• Not useful for long-term care planning or estate planning purposes

Practical Implications: The durability feature is crucial for estate planning because incapacity is often when families most need someone to manage financial affairs, make healthcare decisions, or handle legal matters. Without a durable power of attorney, families may need to go through expensive and time-consuming guardianship or conservatorship court proceedings to gain authority to act for an incapacitated loved one.

It is critical to note that even if your power of attorney is “durable,” it is still critical that your power of attorney include provisions that you may require in the future. A basic statutory power of attorney does not have provisions that would allow your agent to protect your assets or income in the event you needed Medicaid long-term care, or provisions that would allow your agent to perform tax planning to minimize estate taxes. You must be sure to consult with an elder law attorney to make sure that the necessary provisions are included to maximize the planning strategies that your agent may need to perform on your behalf in the event you become incapacitated and need long-term care.

For these reasons, it is important to seek the assistance of an elder law attorney to prepare a durable power of attorney for you as one of the foundational documents you will need for a comprehensive estate plan.

Contact us today at 516-466-WILL (9455) and we will be happy to help you with your estate plan.

Changes to the New York State Power of Attorney Law are now in effect as of June 13, 2021.

On December 15, 2020, changes to the New York General Obligations Law in relation to the statutory short form Power of Attorney were signed into law, with the effective date of June 13, 2021.

The new law will substantially change the format and enforceability of the power of attorney.

A Durable Power of Attorney (POA) is the most critical planning tool that will be used during your lifetime.  The POA gives the person or people you designate (your “agent”) broad powers to handle your personal financial affairs on your behalf.  Some of these powers include handling real estate, banking, business, insurance, estate, and tax transactions.   Without a properly drafted and executed Durable Power of Attorney in place, in the event of your incapacity, your loved ones may be faced with bringing a legal proceeding to handle your personal and financial affairs, which can cost thousands of dollars, time, and stress that would have been avoidable with proper planning.

Until now, a Statutory Gift Rider (SGR) would need to be executed in addition to the short form Power of Attorney to be allow for broader gift, tax, and Medicaid planning.  The signing requirements for an SGR were different than the short form. Whereas the short form required the principal to sign in front of a notary, the requirements of an SGR included both notarization and the signature of two witnesses.

The new law addresses criticism that the current power of attorney was often unenforceable due to its complex format and strict requirements as to form and execution. The objective of the new law was to simplify the document and facilitate its enforceability.

Some of the major changes addressed in the updated law are the following:

1. The new power of attorney form will condense the current two form format, the Short Form and Statutory Gifts Rider, into a one form format.
2. The updated law requires substantial conformity with the wording of the law, replacing the strict “exact wording” requirement.
3. In addition to the notary, the power of attorney form will now require two witnesses as well.
4. Whereas the current law requires third parties to accept a power of attorney presented to them, with the new law banks and will allow imposition of penalties if unreasonably rejected. The new law will reduce the likelihood of banks or other financial institutions rejecting a power of attorney.
5. The updated law will allow a power of attorney to be signed at the direction of a person, and not by himself or herself, which is crucial in the event a physical disability prevents a person from signing the document independently.

A power of attorney is a complex document that is one of the most important documents every adult should have as part of their estate plan. Therefore, while the new law is intended to facilitate the execution and use of a power of attorney, it is highly advisable to have one prepared by an attorney experienced in estate planning and specifically, elder law, to ensure that your form will include all the necessary provisions to allow your agent to act on your behalf to the full extent needed when necessary. You want to be sure that you have the proper documents in place in the event of a sudden injury, illness or incapacity.

An elder law attorney is experienced in assisting clients who no longer have capacity and are most knowledgeable on the crucial provisions that must be added to a power of attorney while a person has capacity to sign one. For example, an elder law attorney will include provisions in a power of attorney relating to long term care planning and government benefits that an attorney that is not experienced in those areas may possibly omit.

How We Can Help

If you have a power of attorney prepared before the effective date of the updated law, your power of attorney should still be enforceable as long as it was properly prepared and executed according to existing law at the time it was signed. We invite you to contact us to review it and ensure that it is effective and will meet statutory requirements.

If you do not yet have a power of attorney in place, we would be glad to assist you with this and your other estate planning needs.

It is always best to consult with an experienced attorney to ensure you not only have a good power of attorney in place, but that your full estate plan is up to date and reflects your wishes, your current situation and the current law.