Power of attorney (POA) documents are key to incapacity planning.
Estate planning involves more than deciding who inherits what when you die.
A comprehensive plan also addresses incapacity through illness or injury.
Families benefit when their aging or ailing loved ones have executed a general durable power of attorney.
With this fundamental legal document in hand, the appointed agents manage investments, pay bills, withdraw required minimum distributions from retirement plans, and arrange for long-term care.
Without the necessary legal authority, families may be unable to provide essential, timely support to their aging loved ones.
Unfortunately, even those who have made preparations through proper estate planning can find themselves stonewalled by financial institutions or banks refusing to accept the power of attorney.
Yikes!
Having a power of attorney rejected by a financial institution can exacerbate stress.
Financial institutions and banks may have various reasons for not accepting a power of attorney document.
Two common reasons cited are that the document does not align with the institution's internal requirements or that it is outdated.
Some banks may require customers to use the bank's "in-house" power of attorney forms or request additional verifications.
While many banks insist their policies are designed to address concerns over liability, fraud, and unclear language, other institutions may simply have staff unfamiliar with what a power of attorney is and how it works.
Regardless, these delays or denials can critically disrupt the ability of loved ones to make time-sensitive financial decisions during times of crisis.
For a power of attorney to be legally valid, it must be signed by the individual granting the authority and, in some states, witnessed or notarized.
If the document meets these requirements, it should be enforceable.
Many financial institutions will interpret the documents narrowly to align with their own risk-avoidant protocols.
For families trying to pay urgent expenses or serve as caregivers, this can be a stressful and frustrating experience.
What can families do in this situation?
Because most states have laws protecting against unreasonable rejection of power of attorney documents, the bank or financial institution may be required to respond to the request within a specific period of time.
If the bank does not have a legitimate reason to refuse the power of attorney, it may be required to accept it.
If the bank or financial institution of your loved one denies your power of attorney, you should ask them to provide their reason in writing.
Although you cannot control the actions of these institutions or their staff, you can take steps to minimize the risk of rejection when drafting a power of attorney.
What are these steps?
The first step involves the type of document used.
By choosing to create a general durable power of attorney, the document will remain valid even after the principal is deemed incapacitated.
The second step is to use clear language authorizing all necessary final powers.
When selecting an agent, you should choose a representative who is financially responsible and trustworthy.
After the document has been signed, we advise our clients to take it directly to the banks or institutions if it will be primarily used to handle investments or access accounts.
Many banks will place a copy on file to simplify future transactions.
On the other hand, if a bank rejects the "freshly" executed power of attorney, it is better to know and deal with than now rather than later in crisis mode.
If you have taken all of these precautions and the power of attorney is still rejected, reach out to your estate planning attorney.
In rare cases, court intervention or legal action may be necessary as the next step.
When financial institutions have concerns over risks or have their own internal power of attorney forms, they may initially reject your power of attorney.
Unless a legitimate reason for refusal exists, the valid power of attorney should be honored in the end.
To reduce the risk of rejection by an institution, create a durable power of attorney document using clear and concise language.
By presenting the document to your bank before it is needed, you can avoid complications when the powers are necessary and time-sensitive.
Working with an experienced estate planning attorney in your state is the best way to prevent complications with incapacity planning.
This post is for informational purposes only and does not provide legal advice. You should consult an attorney for advice on any specific issue or problem. Nothing herein creates an attorney-client relationship between Harvest Law KC and the reader.
References: AARP (July 31, 2023) "What Caregivers Can Do When Banks Reject a Power of Attorney?" and Consumer Financial Protection Bureau (August 30, 2024) "My family member signed a power of attorney (POA) but when I took it to the bank/credit union, I was told the POA has to be on the bank/credit union's form. What can I do?"
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