On December 16, 2022, New York Gov. Kathy Hochul vetoed a proposed law (Bill No. A4601 & S8892) that would have imposed a new requirement for principals of a power of attorney who are trustees or beneficiaries to put co-trustees and co-beneficiaries on notice that they signed a power of attorney. New Yorkers should rejoice but should continue opposing this proposed law.
"While the law has a commendable purpose—'To provide more transparency in certain financial matters.'—it has serious problems," I wrote on this site on June 9, 2022. In addition to writing the blog post, I volunteered with other New York lawyers to help our esteemed colleague, David Goldfarb, secure opposition to the bill by the New York State Bar Association's Elder Law Section Legislation Committee. Further, I posted this comment on the S8892's website:
The justification for GOL § 5-1515 is commendable. But I do not support this bill and hope it will be vetoed by the governor. The proposed rule is going to lead to confusion:
(1) The proposed statute does not state the consequences of failing to notify a co-trustee or co-beneficiary. Does the failure to put them on notice make the power of attorney a non-statutory power of attorney, or does it make the attempted delegation of duties void? What is the penalty for non-compliance?
(2) Proposed GOL § 5-1515(1) seems to tacitly permit the ability of trustees to delegate their duties using a general power of attorney. But the law is still unclear as to the extent of a trustee's ability to delegate duties using a general power of attorney. Case law has conflicting interpretations of GOL § 5-1502G(2), which might be read to permit a fiduciary's ability to use a general power of attorney or to completely prohibit the use of a general power of attorney by a fiduciary. If the law prohibits trustee delegation using a general power of attorney, then proposed GOL § 1515(1) should not implicitly endorse such prohibited practice.
(3) Regarding proposed GOL § 5-1515(2), beneficiaries do not have the right or ability to use a trust account as their own, so it is not clear how they can "raid the trust . . . thus taking all funds."
When Gov. Hochul rejected A4601 from becoming law, she included with the veto a statement explaining her rejection of the bill--Vetoed Memo.111:
VETO MESSAGE - No. 111
TO THE ASSEMBLY:
I am returning herewith, without my approval, the following bill:
Assembly Bill Number 4601, entitled:
"AN ACT to amend the general obligations law, in relation to requiring principals and beneficiaries to notify co-trustees and co-beneficiaries of the signing of a power of attorney"
The bill would require a principal, who acts as a trustee of a trust, to notify all other co-trustees when such principal-trustee signs a power of attorney that affects the trust. The bill would also require a beneficiary of a trust to notify all other co-beneficiaries when such beneficiary signs a power of attorney.
While legal notice requirements are generally beneficial, the notice requirement called for by the bill presumes that a trustee is legally permitted to delegate duties to an agent through a power of attorney. Although this area of law is currently unsettled, the bill would implicitly deem it settled. Additionally, fulfilling the notice requirement with respect to beneficiaries may pose challenges since beneficiaries of a trust are not always known to be beneficiaries.
Therefore, I am constrained to veto the bill.
The bill is disapproved. (signed) KATHY HOCHUL
New Yorkers should continue to oppose this proposed legislation because Gov. Hochul's veto can be overridden by a two-thirds majority from both legislative houses.