The power of attorney law in New York has been in effect since September 2009 (check your State’s POA law for provisions relating to monitoring). Through the legislation, many provisions were added to protect the financial well-being and safety of the individual granting the powers (the “principal”). There was significant concern that under the former law, elderly individuals were particularly vulnerable due to the broad powers inherent in the document.
We know that a power of attorney can be an exceptionally effective estate and elder law planning tool if it is drafted correctly and contains all of the necessary powers. When meeting with clients, we stress that having such a properly drafted and executed power is one of the most important documents to have. For the short-sighted individual who, for whatever reason, does not wish to move forward with asset protection planning at the moment, executing a broad and expansive power of attorney that has been modified to his/her specific needs will enable planning to be effectuated at a later point in time.
Very often, individuals executing a power of attorney have no problem deciding on an agent or agents to appoint. Typically, family members and children are selected by the principal to act on the principal’s behalf. The most requisite element is that of trust. If the principal trusts the agent implicitly, he can have peace of mind that the agent will act in his best interests in the future. Sometimes, however, the principal has doubts about the agent. Individuals might not entirely trust their relatives, or they might trust their relatives but may question the relatives’ ability to act as agent, or they might simply not have any close family members to name as agent(s).
In such a predicament, the principal has a few options. First, the power of attorney provides that more than one agent can be appointed at the same time, and both or all agents must act together. This may ultimately present an administrative burden, but it will ensure that there is some type of check and balance system in place. Of course, the principal can name 2 or more agents to act separately, and although this would make it easier for the agents to act, this would provide no check and balance protection.
Further, the law gives the principal the ability to appoint a “monitor” to oversee the actions of the agent. This is an added measure that the new legislation included in order to protect the principal from potential abuse by the agent. The monitor has the ability to request and receive a record of all financial transactions performed by the agent.
If the agent does not comply, the monitor also has the ability to compel the agent to furnish these records. The monitor can also request a copy of the power of attorney from the agent. While the law does not impose a fiduciary duty on the monitor, such an appointment would generate a sense of vigilance in the agent, as he/she knows that someone is potentially reviewing his actions.
As indicated above, it is critical to have an updated, comprehensive and properly executed power of attorney that complies with the statute. We urge our readers not to simply download a power of attorney form from the Internet, as that document will not set forth needed provisions and will not provide needed protection. And, for those who have concerns about the trustworthiness or financial prudence of an appointed agent, selecting a monitor to oversee everything is a wonderful and viable option.