To:
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Date:
New Jersey Law Revision Commission
Staff
Durable Power of Attorney Project
June 8, 2009
MEMORANDUM
Commissioner Burstein suggested that Staff examine whether modifications
similar to those recently made to New York’s durable power of attorney law (Chapter
644 of the Laws of 2008, signed into law as Chapter 4 of the Laws of 2009) are
warranted in New Jersey, particularly in the area of gifting. This memorandum compares
the relevant law on durable powers of attorney and discusses Staff’s preliminary
assessment of the need for revision of current New Jersey law.
In considering the recent changes to the New York law, Staff reviewed two New
Jersey statutes: N.J.S. 46:2B-8.1 et seq. the Revised Durable Power of Attorney Act,
(“Durable POA Act”); and N.J.S. 46:2B-10 et seq., which governs powers of attorney for
the purpose of conducting banking transactions (“Banking POA Act”).1 Staff also
cursorily reviewed the law on advance directives for health care and mental health care,
which are governed by N.J.S. 26:2H-53 et seq., New Jersey Advance Directives for
Health Care Act, and N.J.S. 26:2H-103 et seq., New Jersey Advance Directives for
Mental Health Care Act, respectively.2 Staff also cursorily reviewed the Uniform Power
of Attorney Act (UPOAA) 3, promulgated by NCCUSL in 2006.4
Recent Changes to New York Law
New York’s Chapter 644, signed into law at the beginning of 2009 and effective
September 1, 2009, was the result of eight years of study by the New York State Law
Revision Commission (“New York Commission”). Chapter 644 amends New York’s
General Obligations Law to provide significant reforms to the use of powers of attorney
in New York.
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N.J.S. 46:2B-8.1 et seq. is expressly intended to complement and not supersede 46:2B-10 et seq. The
Banking POA Act provides that an agent described therein shall be a fiduciary within the meaning of the
Uniform Fiduciaries Law, N.J.S. 3B:14-52 et seq. (“UFL”). The UFL governs the liabilities of persons
dealing with fiduciaries. The Durable POA Act, however, makes no reference to the UFL even though
N.J.S. 46:2B-8.1 et seq. post-dates the UFL.
2
To the extent they are inconsistent, these statutes take priority over N.J.S. 46:2B-8 et seq. and N.J.S.
46:2B-8.1 (which repealed and replaced 46:2B-8). Durable powers of attorney for health care executed
prior to the effective date of these statutes, however, have the same legal force and effect as if executed in
accordance with these statutes’ provisions.
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The UPOAA was promulgated by the National Conference of Commissioners on Uniform State Laws in
2006. It has been adopted in four states, Colorado, Idaho, Nevada and New Mexico. It has since been
introduced in Illinois, Indiana, Maine, Maryland, Minnesota, Montana, Oregon and Virginia.
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UPOAA supersedes the Uniform Durable Power of Attorney Act, the Uniform Statutory Form Power of
Attorney Act, and sections of the Uniform Probate Code.
The New York Commission determined that the power of attorney should remain
flexible enough to allow the agent “to carry out the principal’s reasonable intentions”5 but
because of its easy creation and significant effect on the financial management of the
principal, should also contain clear and consistent direction for its effective use. The
former New York law made it difficult for a principal to make an informed decision
about what kind and how much authority to give an agent with respect to the two very
different purposes served by a power of attorney: the management of the principal’s daily
financial affairs and the reorganization or distribution of the principal’s assets in
connection with financial and estate planning.
Significant changes were made to the New York law to address concerns that the
gifting and transfer provisions were “scattered” among more routine provisions. The
prior forms also did not indicate that the agent could engage in self-gifting or selfdesignation as the beneficiary of the principal’s insurance policies and retirement
benefits. Concerns also were raised with regard to the interaction of the prior law with
federal privacy rules promulgated in April 2003 under HIPAA.
Current New Jersey Law
Enacted in 2000, the Durable POA Act is conspicuously silent on many of the
issues recently addressed by the amended New York law. The Bank POA Act, enacted in
1991, to which the provisions of the Durable POA Act apply, also addresses little of the
subject matter of what has been amended in New York.
In order to better understand how current New Jersey law compares to the New
York amendments, and therefore evaluate whether New Jersey’s law could benefit by
similar modifications, set forth below is a summary of the major changes to the New
York law and how the same issues are addressed by current New Jersey law.
State to State Comparison
1. New statutory short form power of attorney.
New York
The new form created by Chapter 644 is not valid until it is signed by both the
principal and agent, whose signatures are duly acknowledged in the manner prescribed
for the acknowledgement of a conveyance of real property. The effective date of the
power of attorney as to a given agent is the date on which that agent’s signature is
acknowledged. If two or more agents are designated to act together, the power of
attorney takes effect when all the agents so designated have signed the power of attorney
and their signatures have been acknowledged.
See “Changes for Powers of Attorney in New York”, Rose Mary Bailly and Barbara S. Hancock, Vol. 42,
No. 1, New York State Bar Association, Trusts and Estates Law Section Newsletter, Spring 2009, from
which this quote was taken. Most of the information in this memo regarding Chapter 644 is incorporated
from this same article.
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New Jersey
Under the Durable POA Act, a power of attorney need only be in writing and duly
signed and acknowledged as would a deed. (A deed need only be signed and
acknowledged by the grantor, not the grantee, in order to be effective. The date that the
deed is acknowledged may be different than the date the deed is created. Which of these
dates is the “effective” date is not clear from the statute cited (N.J.S. 46:14-2.1).) The
Banking POA Act merely defines “power of attorney” as a “duly signed and
acknowledged written document in which a principal authorizes an agent to act on his
behalf.” The New Jersey statute does not prescribe a form of power of attorney.
2. New major gifts and other property transfers rider.
New York
A grant of authority to make major gifts and other asset transfers must be set out
in a separate rider which contains the principal’s signature, duly notarized and witnessed
by two persons not named in the instrument as permissible recipients of gifts or other
transfers, in the same manner as a will. In the alternative, the principal may grant such
authority to the agent in a nonstatutory power of attorney executed in the same manner as
a major gifts rider. An agent acting pursuant to the authority granted by this rider or
nonstatutory power of attorney must act in accordance with the instructions of the
principal or, in the absence of such instructions, in the principal’s best interests.
New Jersey
The Durable POA Act does not make any specific provision for major gifts or
asset transfers as does New York’s new law. There is no separate “major gifts” form to
complete. The statute does provide that a power of attorney shall not be “construed to
authorize the attorney-in-fact to gratuitously transfer property of the principal to the
attorney-in-fact or to others except to the extent that the power of attorney expressly and
specifically so authorizes.” N.J.S. 46:2B-8.13a. It further provides that an authorization
in a power of attorney to “generally perform all acts which the principal could perform . .
. is not an authorization to make gifts.” N.J.S. 46:2B-8.13a. The Banking POA Act
simply provides that “[n]othing in this act shall be deemed to give an agent any greater
authority or rights than the principal could exercise on his own behalf.” However,
specific acts that an agent may perform under the Banking POA Act presumably could
involve major gift giving or asset transfers.
3. Provisions to address HIPAA privacy rule concerns.
New York
The terms “health care billing and payment matters” are added to the terms
“records, reports and statements” so that an agent can examine, question and pay medical
bills in the event the principal intends to grant the agent power with respect to records,
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reports and statements, without fear that the HIPAA Privacy Rule would prevent the
agent’s access to the records. The law forbidding the agent from making health care
decisions was not changed. New York’s statutory structure continues to permit the
division of responsibilities for health care decisions and bill paying between two
representatives, the health care agent and the agent.
New Jersey
Issues concerning HIPAA are not addressed at all in either power of attorney
statute or in either health care directive statute. New Jersey also has a statutory structure
that permits separate health care and financial powers of attorney.
4. Explanation of agent’s fiduciary duties.
New York
Chapter 644 includes a statutory explanation of the agent’s fiduciary duties,
codifying the common law recognition of an agent as a fiduciary. A notice is added to
the statutory short form explaining the agent’s role, fiduciary obligations, and legal
limitations on authority. The agent must sign the power of attorney as an
acknowledgment of the agent’s fiduciary obligations if the agent intends to accept the
appointment. In transactions on behalf of the principal, the agent’s legal relationship to
the principal must be disclosed where a handwritten signature is required. The principal
may now provide that the agent receive reasonable compensation.
New Jersey
The duties of the attorney-in-fact are not spelled out in the Durable POA Act.
However, the Banking POA Act does set out in detail the activities which the agent has
the authority to perform, including a general statement that the agent also may take any
other action “which the principal may do through an agent concerning any transaction
with a banking institution which affects the financial or other interests of the principal.”
N.J.S. 46:2B-11 (p).
The Durable POA Act provides for compensation of the attorney-in-fact but the
Banking POA Act is silent on this issue. The Durable POA Act expressly provides that
the attorney-in-fact has a fiduciary duty to the principal (which further applies to the
Banking POA Act.)
5. Revocation of the power of attorney.
New York
The new statute adds a section explaining how the power of attorney can be
revoked. It also permits the principal to appoint someone to monitor the agent’s actions
on behalf of the principal, and gives the monitor authority to request that the agent
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provide a copy of the power of attorney and a copy of the documents that record the
transactions the agent has carried out for the principal.
New Jersey
The Durable POA Act provides for revocation of a power of attorney when the
principal has caused all executed originals of the power of attorney to be physically
destroyed or when the principal revokes by a written instrument signed and
acknowledged as a deed would be. A subsequent execution of another power of attorney
does not revoke the earlier one, unless expressly so provided. There is no monitoring
provision.
6. Third parties.
New York
Chapter 644 provides that third parties may refuse to accept powers of attorney
based on reasonable cause. The basis for a reasonable refusal includes, but is not limited
to, the agent’s refusal to provide an original or certified copy of the power of attorney and
questions about the validity of the power of attorney based on the third party’s good faith
referral of the principal and the agent to the local adult protective services unit, the third
party’s actual knowledge of a report to the local adult protective services unit by another
person, actual knowledge of the principal’s death, or actual knowledge of the principal’s
incapacity upon execution of the document or when acceptance of a nondurable power of
attorney is sought on the principal’s behalf. The new statute authorizes the agent to seek
a court order compelling acceptance of the power of attorney when a third party
unreasonably refuses to accept it.
Notably, a “financial institution”, which is now defined as including securities
brokers, securities dealers, securities firms and insurance companies, must now accept a
validly executed power of attorney without requiring completion of the institution’s own
form. Finally, third parties do not now incur any liability in acting on a power of attorney
unless the third party has actual notice that the power has been revoked or terminated.
What constitutes “actual notice” is clearly defined.
New Jersey
Under the Durable POA Act, no person, except the principal, can revoke a durable
power of attorney unless by court order for good cause. The statute provides that third
parties may rely upon the authority granted in a durable power of attorney until the third
party receives actual notice of the revocation of the power of attorney, termination or
suspension of the attorney-in-fact’s authority or death of the principal. Nothing more
addresses a third party’s ability to refuse to accept the power of attorney, although a third
party who has not received actual notice of revocation may, but need not, require that the
attorney-in-fact execute an affidavit stating that the attorney-in-fact had actual knowledge
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of the revocation, or the termination or suspension of authority of the attorney-in-fact, or
the death, disability or incapacity of the principal.
A “banking institution” under the Banking DOA Act includes banks, savings
banks, savings and loan associations and credit unions -- far less than is covered under
the New York definition of “financial institution”. No banking institution under the
Banking DOA Act, that acts in reliance on a power of attorney as set forth in the act, shall
be held liable for injury for an act or omission that is performed in good faith and within
the scope of the institution’s or person’s duties, unless constituting a crime, fraud, actual
malice or willful misconduct.
7. Gifting provisions.
New York
Chapter 644 increases the amount of the gifting provision to match the amount
under the Internal Revenue Code and adds a provision allowing gifting to a “529”
account up to the annual gift tax exclusion. Gift splitting provisions have also been
amended to allow the principal to authorize the agent to make gifts from the principal’s
assets to a defined list of relatives, up to twice the amount of the annual gift tax
exclusions, with the consent of the principal’s spouse. The default statutory provisions
regarding annual exclusions gifting will always be up to date with federal law.
New Jersey
The Durable POA Act and the Banking POA Act do not specifically address these
issues, although perhaps other tax and estate planning laws do.
8. Miscellaneous provisions.
New York
A number of other significant administerial provisions have been added. An
attorney can now certify a copy of a power of attorney instead of having to first record it
in order to then obtain certified copies from the clerk. Investigative agencies and law
enforcement officials may now request a copy of the power of attorney and the records of
the agent and bring a special proceeding to compel disclosure in the event of the agent’s
failure to comply. The basis for termination and revocation of a power of attorney and
registration of an agent are also described as are the relationships among co-agents and
initial and successor agents.
New Jersey
A third party to whom the power of attorney is presented may rely upon certified
copies or photocopies of the original signed document. The Durable POA Act sets out
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procedures for multiple attorneys-in-fact. As already mentioned, revocation is expressly
addressed.
Highlights of the UPOAA
The UPOAA addresses some of the concerns addressed in the New York
amendments, and others not addressed by either New York or New Jersey.
For example, similar to New York’s amendments, the UPOAA also sets out in
detail the agent’s duties. However, the explanation of those duties differs between the
two. The refusal of third parties to accept a power of attorney are addressed in both the
UPOAA and the New York statute in similar fashion, but the UPOAA, unlike New
York’s law, offers alternate provisions to deal with refusals to accept powers of attorney
that are not on acknowledged statutory forms as opposed to those which are on prescribed
statutory forms. Both the New York statute and the UPOAA address when a power of
attorney becomes effective and both contain provisions regarding gifting. Unlike New
York or New Jersey’s statutes, the UPOAA contains an entire section devoted
exclusively to the agent’s authority with respect to personal and family maintenance.
The above compares but a few provisions of UPOAA with current state law. The
UPOAA is quite comprehensive and will require Staff to conduct a careful, thorough
provision-by-provision comparison with New York’s amendments if the Commission
determines that it wishes to proceed with this project. Apparently, the Commission did
not make any written determination in 2006 (when the UPOAA was promulgated)
regarding whether UPOAA should be adopted in New Jersey.
Conclusion
Staff believes that using New York’s recent amendments as a guide, the drafting
of a proposed amendment to the Durable POA Act is a worthy project. Even more
ambitious and worthy would be revision and consolidation of both the Durable POA Act
and the Banking POA Act. Input from professionals in the tax, elder law, and estate
planning fields, is critical to the revision.
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