A power of attorney (also known as a POA) is an estate planning basic; however, more often than you would expect, people find themselves being told a financial institutions will not accept their power of attorney. It’s such a problem that some states have enacted laws to protect the power of attorney.
A power of attorney gives a designated person the authority to act on another’s behalf when making financial or medical 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 only specific situations, but you can be more specific, if you choose. A health care power of attorney, for example, covers medical decisions. Adult children may want a document giving them broader powers called a durable power of attorney. This allows them to take over a parent’s finances, giving them the ability to help in the event the parent is no longer able to make important decisions independently.
Because a power of attorney can be abused, financial institutions 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 generally doesn’t give the child that authority until the parent becomes incapacitated. While parents may prefer the springing power of attorney, it can cause issues for adult children. To use a springing power of attorney, an adult child may need to obtain a statement from at least one physician certifying that the parent is incapacitated, and 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.
At Family Estate Planning Law Group, we have worked with clients for years to address this problem. As part of our process, we help clients work to have their powers of attorney accepted by their financial institutions and placed on file in advance of any crisis situation. While some institutions may be easier to work with than others when it comes to accepting a power of attorney, it’s always best to work to have your power of attorney accepted ahead of time so there’s less confusion and ease of access to funds when a crisis does occur.
Most of us don’t anticipate needing to use a power of attorney, but it’s better to have one and not need it than regret not having one in a crisis. You should discuss a power of attorney with an experienced estate planning attorney. You may not be able to preclude all problems, but you will certainly be better prepared.
For more information, explore our website and contact us to schedule your consultation today!
Reference: Wall Street Journal (June 12, 2016) “When the Power of Attorney Lacks Power”