A Power of Attorney is a legal document giving someone, known as the “agent”, the authority to handle financial and legal matters for the person who creates the Power of Attorney, called the “principal”. A Power of Attorney can be limited: an elderly mother gives her son Limited Power of Attorney to handle the sale of her house. A Power of Attorney can be general, giving the agent broad authority to handle all financial and legal matters.
A Power of Attorney is an important part of an estate plan, but unfortunately, families are being frustrated trying to use them. Banks and financial institutions will often refuse to honor a Power of Attorney. They may reject it because it’s too old. There’s no way of knowing how old is too old. A financial institution recently rejected a Power of Attorney that was thirteen months old. Very commonly, they insist that their customer sign a new Power of Attorney using the institution’s own Power of Attorney form.
Families usually don’t try to use a Power of Attorney until the principal is no longer able to manage, and at that point, may be incompetent to sign legal forms. What happens if the bank says the Power of Attorney is too old, or they simply won’t accept one that isn’t on their own form, but the principal isn’t legally competent to sign a new one?
Sometimes it requires going above local managers to higher-ups, and sometimes it requires the intervention of an attorney.
It is wise these days to be proactive, and make sure that the bank or brokerage firm will honor the Power of Attorney while the principal still has capacity. That can be daunting if the principal has accounts at multiple institutions.
If the principal is elderly, or if there are signs of dementia, another approach is to include a Trust in the estate plan, rather than relying on a Power of Attorney. A valid Trust will be accepted no matter how old it is, and the financial institution isn’t going to have its own form for a Trust.
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