A financial power of attorney is an extremely helpful legal document when you can no longer manage your financial affairs due to an illness or incapacity. You name a trusted person to act as your agent or attorney-in-fact to pay bills and handle your banking transactions and financial matters. It is a significant responsibility because your agent can access your money and bind you to contracts. But they have a fiduciary duty to act in your best interest or are subject to civil or criminal penalties. A power of attorney is an integral part of a complete estate plan.
However, there are many cases when a bank or financial institution rejects a valid power of attorney. It can be extremely frustrating when there is a family emergency, and plans put in place beforehand don’t work as expected. For example, you are an adult child and agent for your mother and need to access her bank accounts to pay bills when she can no longer manage them, but the bank refuses to follow her power of attorney document.
Recently, Kristen McDermott ran into this problem when Vanguard and USAA didn’t honor her mother’s power of attorney document. Even though she obtained a valid POA document from her mother when she had a sound mind, she couldn’t use it when her mother subsequently had dementia. Vanguard rejected her valid POA in favor of their own in-house POA form, the Vanguard Agent Authorization form. And the issue with USAA? It only works with military members. Her mother is a member. McDermott was not.
Reasons Why a Bank May Refuse a Power of Attorney
Unfortunately, banks are inconsistent when dealing with power of attorney documents. Depending on which bank employee you deal with, you may get a different result. But generally, these are the reasons why a bank may reject your power of attorney document:
Banks are afraid of getting sued. Bank legal departments want to avoid getting the bank in trouble by giving access to unauthorized people. Many times, if you present a power of attorney document, the legal department must review it. Many states mandate a period when a bank must respond with either acceptance or rejection. For example, in Virginia, banks have seven days to accept a power of attorney, request a certification or translation, or get a legal opinion once you present a power of attorney document. It is four days in Florida, not including weekends or legal holidays.
Banks have their own form. Even though you have a legitimate and enforceable power of attorney, the bank or financial institution may require the principal to complete their own power of attorney form.
Banks aren’t familiar with your document. Many states have certain language for power of attorney documents, and banks and financial institutions in that state recognize that language or form. If your estate planning attorney has their own form or you use a boilerplate power of attorney form, banks may not approve of particular wording or feel that the document omits something.
Banks want an Agent Certification. Some states require an agent to sign an Agent Certification form in which the agent affirms the following:
The principal is alive
The principal has not revoked the power of attorney
The agent’s authority to act under the power of attorney is not terminated
If the power of attorney is effective on an event or contingency, the event or contingency occurred.
Banks do not see particular language. Again, banks like to avoid problems. So they are looking for some statement that absolves them of liability if they rely on it. A statement might read, “Any person, including my agent, may rely upon the validity of this power of attorney or a copy of it unless that person knows it has terminated or is invalid.”
How To Make Your Power of Attorney Enforceable
There are ways to improve your chance to have your power of attorney accepted by a bank or financial institution:
Check with your bank or financial institution. Once you have your power of attorney document, make an appointment with the bank or financial institution and have them review it. At that time, they may record it, so your agent won’t have any issues when the time comes for them to serve on your behalf.
Use their form. Although it is a hassle to use their form when you have perfectly acceptable power of attorney, it will streamline things later when your agent needs authorization to access your account. Find out now rather than later if they insist on their own paperwork.
Use legal services that mirror state laws. Many people now use online legal service companies to create their own legal documents, but those services vary. Look for a company like FindLaw’s Legal Forms and Services that models its power of attorney document to your state’s laws or approved form. It does not have to be word for word but substantially similar for a bank or financial institution to recognize and accept it. Additionally, make sure your power of attorney includes a reliance statement like the one above.
Start a legal action. While this is the least desirable move, you could sue the bank for not accepting your power of attorney; however, it will take time and incur legal fees.
There are other methods to allow family members and loved ones to access your accounts, such as creating joint accounts or authorized signers. Still, those can cause further issues, so you should seek legal advice before adding someone to your account.
Who Can Override a Power of Attorney? (FindLaw’s Learn About the Law)
What Do I Need To Know To Make a Financial Power of Attorney Myself? (FindLaw Legal Forms and Services Resources)
Create Your Own State-Specific Power of Attorney (FindLaw Legal Forms and Services)
The post Can a Bank Refuse a Power of Attorney Document? appeared first on .