When discussing the possible use of a power of attorney within New York State with a client, attorneys should take care in regard to the potential appointment of a monitor. Though the appointment of a monitor may appear to provide the principal additional protections against misconduct by an agent, the appointment of a monitor may only result in unrealistic expectations and a false sense of security if additional language is not added to modify that power of attorney.
In its 2006 decision for In Re Ferrara, the Court of Appeals stressed the need for agents appointed within a power of attorney to act consistent with the best interests of the principal.[i] The GOL was thereafter modified to provide individuals with more protections when creating a power of attorney.[ii]
One revision was the addition of a new provision which allows the principal to appoint a monitor.[iii] The GOL states that “A principal may appoint a monitor or monitors in the power of attorney who shall have the authority to request, receive and compel the agent to provide a record of all receipts, disbursements and transactions entered into by the agent on behalf of the principal, to request and receive such records held by third parties, and to request and receive a copy of the power of attorney.”[iv] Explaining the value in the appointment of a monitor, the Executive Director of the NYS Law Revision Commission noted, “Such accountability is consistent with the common law requirement that where one assumes to act for another he or she should willingly account for such stewardship.”[v] The revised law also permits the monitor to commence a special proceeding to compel the agent to produce records or for other forms of relief focused upon policing the agent.[vi] However, the role of a monitor is unclear and must be addressed.
The most obvious issue is that the statute itself releases the monitor from any fiduciary responsibilities to the principal.[vii] The Practice Commentaries warn that the laws pertaining to monitors are “silent as to whether the monitor must act and the consequences to the monitor if she does not perform any oversight to the agent.”[viii] As such, the monitor may have no incentive to engage in any efforts to protect the principal who may be relying upon the monitor to protect their interests when making a decision to prepare a power of attorney. The GOL also lacks instructions on other key issues pertaining to monitors, including: how the monitor shall receive notice of their appointment, if at all; how the monitor will accept such appointment; and, if any successor monitors may be appointed.[ix] In addition, the GOL explains how an agent may resign, but the GOL fails to explain how a monitor may resign.[x] The GOL does not specify any process by which the principal should be notified in the event that the monitor resigns, dies, or decides to engage in efforts to protect the principal. Moreover, compensation and reimbursement for expenses incurred by the monitor is also unclear. While the agent shall be entitled to receive reimbursement from the assets of the principal for reasonable expenses and may receive compensation if the principal permits same within the power of attorney, the monitor is not entitled to receive reimbursement for expenses.[xi] Even a well-intentioned monitor may decide to forego efforts to supervise an agent if that monitor is uncertain whether he or she will be reimbursed for expenses and will not receive any compensation.
To address the above concerns, attorneys should consider modifying the power of attorney form within paragraph (g) “Modifications.”[xii] The GOL permits such modifications that are “not inconsistent with the other provisions of the statutory short form power of attorney or of the statutory gifts rider.”[xiii] Possible monitor modifications may include: (1) the manner in which monitors may be notified of appointment and exhibit acceptance of appointment; (2) what fiduciary duties are imposed upon the monitor by accepting appointment; (3) the manner in which a monitor may be reimbursed for expenses and receive compensation; (4) the manner in which monitors may resign, be removed, or successor monitors may be installed; and, (5) specific types, dates and triggering events for accountings which must take place between the agent and the monitor. A monitor can effectively oversee the actions of an agent so long as the power of attorney clearly defines the roles and responsibilities of that monitor. By raising these issues with a client when discussing the possible use of a power of attorney and then modifying the document according to the needs of the client, attorneys may navigate through the challenges posed by the revised GOL to effectively appoint a monitor that truly is armed with the powers to protect the principal.
By: James L. Hyer, Esq.
James L. Hyer is a Partner with Bashian P.C., practicing in the areas of estate planning, civil litigation and transactional matters. Mr. Hyer is a member of the New York State Bar Association House of Delegates and is a member of the Board of Directors of the Westchester County Bar Association. Mr. Hyer wishes to acknowledge the assistance of paralegal Caitlin Baranowski in the preparation of this article.
[i] In Re Estate of Ferrara, 7 N.Y.3d 244, (2006)
[ii] The Durable Power of Attorney is on the Way, 24-JUN Prob. & Prop. 50
[iii] N.Y. GOL. LAW § 5-1509. See Also, D N.Y. Prac., Trusts and Estates Practice in New York § 1:209
[v] Changes for Powers of Attorney in New York, 81-APR N.Y. St. B.J. 41. See Also, 2008 Memorandum in Support of Powers of Attorney
[vi] N.Y. GOL. LAW § 5-1510
[vii] N.Y. GOL. LAW § 5-1509. See Also, 2A N.Y. Jur. 2d Agency § 252
[viii] McKinney’s General Obligations Law § 5-1509
[ix] Elder Law and Guardianship in N.Y. § 4:115
[x] N.Y. GOL. LAW §§ 5-1503(3)(a); 5-1503(3)(b)
[xi] N.Y. GOL. LAW §§ 5-1506. See Also, N.Y. GOL. LAW § 5-1513
[xii] N.Y. GOL. LAW § 5-1513. See Also, Chronic Illness, 25-APR Prob. & Prop. 48. See Also, There’s A Reason It’s The Power of Attorney, 83-AUG N.Y. St. B.J. 18
[xiii] N.Y. GOL. LAW § 5-1503