Our estate planning process includes not only a will or a trust, but incapacity documents designed to give your chosen agent the right to handle your financial affairs if you can’t. Known as a General Durable Power of Attorney, or Power of Attorney (POA) for short, this document is a key part of any proper planning. Yet it has a huge downside: Many financial institutions refuse to accept them.

Why Your POA Has No Power

As a legal document, the POA must be properly prepared and executed. Each state has specific rights that are granted to the agent, and a good Power of Attorney will reference the act specifically, or spell out the rights and responsibilities. In addition, a POA cannot simply be signed and dated; the signature must be notarized and affixed with a state-sanctioned notary seal. Documents that name an agent but are not properly executed will not have any legal power.

Even a properly signed and executed Power of Attorney may not be accepted. Depending on the financial institution, additional documentation or requirements may prevent the POA from fully transferring authority to the agent. It’s not legal, but it happens. Attorneys nationwide have reported issues with financial institutions unwilling to accept valid POAs.

Why Banks Refuse

The increase in fraud, particularly identity theft and elder abuse, has increased financial institutions’ safety standards.  For this reason, many institutions create their own Power of Attorney forms, and refuse to accept forms prepared by outside attorneys. While in some cases it might be fine to sign such forms, check with your attorney first. Keep in mind that if a bank develops a form, it will be designed with the bank’s best interests in mind. It may, for example, indemnify the bank against their own errors, or require arbitration rather than allowing you to bring a lawsuit.

In some cases, it’s fiscally responsible of the bank or financial institution to refuse the Power of Attorney, particularly if it is more than 3-4 years old. Many things can change in that time. People pass away or get divorced, children develop addictions or personality disorders, mental health deteriorates, and close friends fall out of touch. We recommend reviewing your legal documents every year to ensure that the agents you have named are still the people you trust the most. If a client brings in a Power of Attorney naming a deceased person as the first choice, it raises a red flag with the bank. It can be financially devastating for the wrong person to be in charge of someone’s account, so the bank can’t simply accept any document at any time.

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What To Do if You Can’t Use Your POA

The best defense is a good offense, right? So make sure you have a lawyer draw up your Power of Attorney, and keep it up to date by re-executing documents every few years. We also recommend that our clients take their freshly signed POAs to their banks in person and show them that they have appointed an agent, or provide copies of the document to their financial planner for storage.

If you have done everything right, and possess a validly signed POA that a financial institution is refusing to accept, the best solution is to keep asking to speak to a manager or higher-up. Most major institutions have policies in place to accept Powers of Attorney provided they are valid and current. While the teller at a bank or the customer service rep at an investment firm might not understand this policy, the top level executives often comprehend the negative press that can result when a person is not able to manage their loved ones affairs even with a valid Power of Attorney.

If an institution does continue to refuse, it may sometimes be possible to have the documents signed again. If your loved one is fully incapacitated, or already showing signs of dementia or other mental degradation, you do have the option of taking legal action. Hiring an attorney to argue the validity of the Power of Attorney often leads to the financial institution changing their mind and accepting the document.  If all else fails, you can petition a court to declare you the conservator of their estate.

Despite the drawbacks, drawing up a Power of Attorney is still the best way to protect your assets and your financial future. We pride ourselves on ensuring all our documents are in line with current state laws, and are properly drafted and executed according to Colorado statute. If you need assistance with any incapacity documents or estate planning, we are here to help, so give us a call today.