Is Your Power of Attorney Strong Enough? The Devil is in the Details

Is Your Power of Attorney Strong Enough? The Devil is in the Details

In the realm of estate planning, a Power of Attorney (POA) stands as a crucial document. However, not all Powers of Attorney are strong enough to withstand the test of time and all situations. The devil is, as they say, in the details. That is, it may seem like a simple document but it is deceptively complex and a POA with too little power is just a useless piece of paper.

A major issue is that people will download a Power of Attorney from the internet or a title company that does not include a “Modifications” section that expands the basic powers. I would go as far to say that if the of your Power of Attorney has a blank Modifications section – your POA is not strong enough.


What is a Power of Attorney?

A Durable Power of Attorney is a statutory form that enables someone to appoint an agent to manage their financial and legal affairs. The Principal (creator of the Power of Attorney) chooses a trusted individual, or individuals, to act as agent during the Principal’s lifetime. The idea is that the agent is empowered to manage the Principal’s financial affairs if the need arises. Even if incapacitated, the appointed agent will still be able to use the document to access bank accounts, sign checks, pay bills, and carry out any essential estate planning. The Power of Attorney “durable” because it extends even to when the Principal becomes incapacitated.

Particularly in New York, understanding the nuances of this statutory form, governed by Title 15 of New York General Obligations Law, is essential for ensuring your affairs are handled as per your wishes, especially in unforeseen circumstances like the onset of dementia or Alzheimer’s.

Puny Powers

Powers of Attorney law in New York enumerates several categories of powers under GOL Sections 5-1502A through 5-1502N that can be granted to an agent:

(A) real estate transactions

(B) chattel and goods transactions

(C) bond, share, and commodity transactions

(D) banking transactions

(E) business operating transactions

(F) insurance transactions

(G) estate transactions

(H) claims and litigation

(I)  personal and family maintenance

(J) government benefits

(K) financial matters related to health care

(L) retirement benefits

(M) tax matters,

(N) full and unqualified authority to my agent(s) to delegate any or all of the foregoing powers to any person or persons whom my agent(s) select;


(N) all other matters.

These powers are found in any run of the mill power of attorney. You might be thinking that the broad catch-all “all other matters” gives your agent all the power they need.  Nope. These statutory powers are limited unless expressly stated otherwise in the “Modifications” section of the form. But you wouldn’t know this unless you read the statute.

For example:

Section 5-1502D provides that “banking transactions” allows the agent to modify, terminate and make deposits to and withdrawals from any deposit account. But, with respect to joint accounts, the agent cannot add a new joint owner or delete a joint owner unless such authority is expressly granted.

Likewise, an agent’s authority to handle insurance transactions under 5-1502F does not allow the agent to change beneficiary designations unless the Durable Power of Attorney specifically states otherwise.

Under Section 5-1502L an agent similarly cannot change the designation of beneficiaries of any retirement accounts unless this authority is expressly granted.

Gifting Powers

GOL Section 5-1513 sets forth particular requirements regarding the authority of an agent over gifting. This makes sense because you do not want your agent to have too much power unless you make the calculated decision that you feel comfortable giving them that much power. If the Principal grants the agent authority relating to personal and family maintenance (Section (I) above), the agent may make gifts that the Principal customarily made to individuals, including the agent, and charitable organizations, not exceeding $5,000 in any one calendar year.

In order to authorize the agent to gift in excess of the $5,000 annual limit, the Principal must expressly grant that authorization in the Modifications section, including whether the agent has the authority to make gifts to themself.

Why Your Power of Attorneys Needs Extra Powers

While gifting and changing beneficiary designations is a significant power that should not be given lightly, it can be critical in certain situations.  Gifting is a common tactic in Medicaid planning, where assets need to be transferred out of the Principal’s name to meet the eligibility requirements.

To qualify for Medicaid coverage for home care or nursing home care in New York in 2024, an applicant cannot have more than $30,182 in assets. If the applicant lacks the capacity to make the necessary asset transfers or without a Power of Attorney with gifting authority, the only alternative is for a legal guardian to be appointed by the court. Such a guardianship proceeding is costly and time-consuming, and the judge may not allow Medicaid planning.

Maybe the Principal failed to name his spouse or children as beneficiaries on a life insurance plan or retirement account?  If the Principal has lost capacity and the family realizes this error, they can do nothing without a proper power of attorney. Assets that would have passed according to the estate plan now have to be probated – which can cost thousands of dollars and take months if not years.

What is Too Much Power?

This may seem like a lot of power to give an individual. It is and it isn’t. First, the agent must always act in the Principal’s best interest and according to the Principal’s testamentary plan.  A sibling acting as agent cannot change the beneficiary to themself when the Principal’s Will has assets going to a spouse and child. Second, most of the time the Agent is a spouse or child who will be inheriting the assets anyway. What harm is there in allowing someone you trust to act as you would act?

Nonetheless, you may not give every agent the power to gift in unlimited amounts to themselves. That power is usually reserved for spouses and children. Similarly, when there is a second marriage, a blended family, we may not give the spouse the power to change beneficiaries. We want to make sure the beneficiaries remain the kids from the first marriage (no offense).

These area decisions the Principal should make with their attorney – at a time when they double  check they have the desired beneficiaries named on all accounts and what is going to whom and when.

Tailoring Your Durable Power of Attorney: the Importance of Expert Legal Advice

 Which brings us back to the conclusion that estate planning is not piecemeal – it has to be done at in a comprehensive way.  You and your attorney should be looking at all of your assets – those passing through probate, those with beneficiary designations, future rights to inheritance.

A Power of Attorney is more than a mere legal formality. Crafting a POA that aligns with your estate planning goals requires professional legal expertise. An experienced estate planning attorney can guide you through the intricacies of assigning the right powers to your agent, ensuring the document is neither too broad nor too restrictive for your needs. By understanding its powers and crafting it with precision, you can ensure that your financial and legal affairs are in trusted hands, even in unforeseen circumstances.

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