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Today's Law: New Power of Attorney Law, Extended Health Insurance Coverage and Equitable Distribution Credits
September 7, 2009
by Forsyth & Forsyth TODAY'S LAW
Newsletter for clients of Forsyth & Forsyth September 7, 2009 No 90
NEW POWER OF ATTORNEY LAW
Last winter the New York Legislature changed the power of attorney law, effective September 1. It doubled the number of pages in the statutory form, from three to six. One page contains instructions for the person, called the principal, signing the form. One page contains instructions on how the agent must act.
The Legislature was concerned that persons were signing multiple powers of attorney, confusing third parties. It heard of agents who disobeyed the directions of their principals or who took actions not in their best interests. Sometimes this misuse was fraudulent.
To clear up third party confusion, the law now states that the signing of a power revokes all previous powers, unless the principal states to the contrary. The instructions to the agent explicitly state what the agent must do, such as keep records, and not do, such as use the principal’s assets to benefit himself. The agent must sign the form, acknowledging his legal responsibilities, before he can act.
If the principal wants the agent to make gifts, the principal must sign a separate three-page form. It opens with a prominent “CAUTION.” The making of gifts by an agent “could significantly reduce your property or change how your property is distributed at your death.” The agent must follow the principal’s directions or only make gifts “which the agent reasonably deems to be in (the principal’s) best interest.”
The principal may authorize the agent to charge a fee for his services. If nothing is said in the form on the subject, the agent may not do so. An agent may always recover his reasonable disbursements.
Remember that a power of attorney only allows a third person to make decisions about your financial affairs. By law an agent cannot make health care decisions. Only a duly designated health care proxy can do that.
The new law does not invalidate any power signed before September 1. Actually, the law enhances those powers. All “third parties” doing business in New York must honor the statutory form, whenever signed. The former law only required certain financial institutions to honor the form. Notable by their absence were brokerage houses and mutual fund companies. Now the Vanguards of the world cannot kick back a power of attorney because it is not on their form.
EXTENDED HEALTH INSURANCE COVERAGE
This summer the New York Legislature passed another law of interest to twentysomethings and their parents. The law extends health insurance coverage to an unmarried child of an insured parent through the age of 29 years.
Many health insurance policies now cover dependents up to a certain age. The coverage is incorporated into the rate for a family policy.
The new law extends coverage to children not otherwise receiving health care benefits through work. And the scope of the coverage must be the same afforded the parent.
The extension is not free. The insurance company may charge an additional premium for the coverage, not to exceed the cost of a policy for a single person. The employer of the parent does not have to pay for the extended coverage. The parent or the child may have to pay but at least the child will get coverage through a group plan. Unlike a child under a family policy, a child is eligible for the extended coverage even though she is financially independent of her parents.
There are limitations to the law. First, the child must reside in New York. Second, employers who self-insure, i.e., who do not contract with an outside organization to provide health insurance, are exempt. A notable example of a self-insurer is our #1 employer, the University of Rochester.
The law took effect September 1 and applies to all insurance contracts issued or renewed after that date.
EQUITABLE DISTRIBUTION CREDITS
New York’s Court of Appeals recently decided a case that will impact divorce settlements. The case involved a couple who used funds acquired after marriage to pay a student loan taken out by the husband before marriage and maintenance owed by the husband to a previous wife. When the couple separated, the second wife sought a 50% credit for the moneys spent on the two antecedent debts.
The wife’s argument was simple and appealing. She did not receive any direct benefit from the payments. If her husband had used his separate funds to pay the two debts, there would be more marital property to be equitably divided.
The Court saw the situation in a different light, treating the debts as living expenses. “Where payments are made before either party is anticipating the end of (a) marriage and there is no fraud or concealment, courts should not look back and try to compensate for the fact that the net effect of the payments may have resulted in the reduction of marital assets. Courts should not second guess the economic decisions made during the course of a marriage, but rather should equitably distribute the assets and obligations remaining once the relationship is at an end.”
The wife would not get a credit for the payments on the antecedent debts.
The wife did win on another point. The husband reported $1.8 million received on the sale of stock in two private corporations as his self-employment income on their joint tax return. The Court exercised its discretion and classified the money as marital property, to be equitably distributed.
Sometimes a spouse may not take a position contrary to a position taken on a tax return. This means that by signing a joint tax return a spouse is bound by the other spouse’s representation as to the nature and amount of the income reported on the return. The tax return is treated as an affidavit.
This rule did not block the wife in the case. Marital property includes earnings acquired during marriage, whether paid by another or through a business owned and operated by the other spouse.
If you have any questions about powers of attorney, health insurance, equitable distribution or any other matter, please contact us.
FORSYTH & FORSYTH
16 W. Main Street, Suite 110
Rochester, NY 14614
(585) 262-3400
forsythlawfirm.com
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