A durable power of attorney is a legal document that is commonly heard of yet is one that few truly understand.
Once a person has drawn up a durable power of attorney document, they may sit back with a sigh of relief, believing that if the worst happens and they find themselves incapacitated, a trusted loved one will appropriately manage their finances and property. Yet, despite the purported benefits of the document, the power of attorney may be more powerless than one would have thought.
It can be rightfully assumed that a legal document, signed by the involved parties, witnessed and notarized by a recognized official, would be sufficiently acceptable. However, should that trusted loved one show up to your local investment broker with the document in hand, they may find out that even a durable power of attorney is held in low esteem and not honored in such situation.
What are the reasons a financial institution might reject someone’s own power of attorney document?
Requiring Additional Authorization
The primary reason a durable power of attorney might not be recognized is because many banks, credit unions, and brokerage firms have their own documents authorizing who is in charge should an account holder become unable to manage their own affairs. The problem arises when the financial institution requires the original account holder to sign their documents but the account holder is incapacitated and cannot sign, causing the designated representative having to request access to the account. In short, it becomes a conundrum for both parties.
Even if a person lives in a state with statutes recognizing a durable power of attorney, many financial institutions still resist it. They reject an individual’s state recognized power of attorney by asserting that their own financial institution’s documentation is required. In addition to a bank’s own paperwork, they might also require written statements from treating physicians attesting that the account holder is, indeed, unable to manage their own affairs. Representatives for a regulatory organization for banking practices claim that this is for consumer protection.
So, financial institutions are not being difficult just to be difficult. They have their own security standards in place. However, the problem is that many people are not aware that a financial firm’s specified documents will be necessary in addition to the durable power of attorney.
Does It Pass the ‘Stale Test’?
Another reason a durable power of attorney is rejected is that it might be considered stale. This means the document is dated years earlier than it should be, thus it is too old. With regards to a person’s finances, a bank or brokerage firm may look upon old documents with suspicion. When creating a durable power of attorney document, there is no ‘refresh’ button. After several years pass, it is advisable to rescind the powers of the old and ring in the new with freshly signed and notarized paperwork as well as updating any required authorization documents with financial institutions.
First and foremost, visit every financial institution you have accounts with and ascertain if they have their own authorization forms that are required in lieu of a durable power of attorney. Before you put pen to paper and fill out the forms, be sure you have an attorney take a look at what the forms delineate. Some may include an indemnity or arbitration clause that is unfavorable as the account holder. Once the forms are determined to be acceptable, complete them thoroughly and return them to the appropriate financial institutions. Don’t forget to make copies for your own records.
If you are dealing with an “after the fact” case, an attorney may be necessary to move things along, especially if you possess a powerless power of attorney document, or lack the proper forms required by the financial firm. An experienced lawyer has the resources and knowledge to encourage a bank to accept a properly executed durable power of attorney. Many banks are not interested in the troubles associated with litigation, as a call or letter from an attorney can go a long way in gaining their cooperation.
The worst case scenario of engaging in litigation can be a long and expensive process. So, don’t get caught with a powerless power of attorney. Be proactive today and find out what your own financial institutions require should you ever need a trusted one to manage your finances, as well as your care.