If a financial institution does not accept a properly prepared power of attorney, you will have to know your rights and be prepared to assert yourself.
A power of attorney is an estate planning basic; however, more often than you would expect, people find themselves being told by financial institutions that they will not accept the power of attorney. It’s such a problem that a number of states have enacted laws to protect the power of attorney.
This form gives a designated person the authority to act on another’s behalf when making financial decisions. It is commonly employed by adult children whose aging parents can no longer act on their own. However, financial institutions frequently make it difficult to exercise that power. The Wall Street Journal article, “When the Power of Attorney Lacks Power,” lists some steps to avoid potential problems.
The most basic powers of attorney cover specific situations. Adult children may want a broader document, which is called a durable power of attorney. This allows them to take over a parent’s finances at any point, giving them the ability to help in the event the parent is no longer able to make important decisions independently. A health care power of attorney covers medical decisions.
Because the power of attorney can be abused, banks are concerned about liability for their customers’ losses and have become wary of accepting powers of attorney. As a result, a number of states have enacted laws requiring them to do so under certain circumstances.
If a parent has a power of attorney, the first step is to determine what kind of power it is. A standard durable power of attorney gives the child the authority to act on the parent’s behalf immediately after the document is signed, but a springing power of attorney doesn’t generally give the child that authority until the parent becomes incapacitated. While parents may prefer the springing POA, it can cause issues for adult children. To use a springing power of attorney, the form may require an adult child to obtain a statement from at least one physician that certifies that the parent is incapacitated, although medical privacy laws can make this hard to do.
Families can frequently avoid problems if parents introduce an adult child with a power of attorney to managers at their bank or financial firm prior to a time of crisis. Some financial institutions ask account owners to sign separate powers of attorney drafted by the firm’s own lawyers, making it simpler for them to administer a standardized form. But that form may require a person to waive his or her right to sue the firm, so read the fine print.
If rebuffed by a financial institution when trying to use a power of attorney on behalf of a parent who is unable to get involved, ask to speak to a supervisor or try another branch.
Some financial institutions may ask you to take actions to assure them that your power of attorney is legitimate—such as to verify the identity of the grantor by securing a so-called medallion signature guarantee from a bank with his or her signature on file. If an adult child tries to use a power of attorney without a parent being present, the bank may ask for a notarized affidavit stating that the document is valid.
Depending on where you live, you may have a state law that requires financial institutions to accept the document unless there is credible reason to suspect fraud or abuse. It is possible that your state even levies penalties against those who make it difficult to use a power of attorney. The bank or other institution may be required to pay legal fees if it takes legal representation to enforce the power of attorney.
If you anticipate needing to use a power of attorney, it is recommended that you discuss your states laws in advance with an estate planning attorney. You may not be able to preclude all problems, but you will be better prepared.
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