“I am so frustrated,” the caller reported. “Before my father became ill he did everything he was supposed to do. He si
gned powers of attorney for financial and health care matters, he updated his will and he listed all his assets in a workbook so I could find everything. Now that he has become incapacitated the bank won’t honor his power of attorney. What can I do?”
Don’t let this caller be you or your agent. A power of attorney (POA) is a standard part of every estate plan. In this document the client appoints an agent to take care of the principal’s finances, bills, investments, taxes and other financial matters.
In most states (including Texas), however, there is no legal requirement that a bank or other financial institution must accept even a properly prepared power of attorney. Some banks are notorious for insisting on use of their own short-form powers of attorney.
What can you do to make it more likely that your power of attorney (either the one you signed or the one someone else signed naming you as agent) will be honored? There are techniques you can try. Below are my best suggestions:
- The best practice and the one I always alert my clients to is have your family member sign the bank’s form. Ask your bank, brokerage house, IRA or other retirement plan provider, and insurance companies if they will honor your power of attorney and ask for their response in writing. If they say they will only honor powers of attorney on their own forms, obtain copies of those forms and provide them to your attorney to make sure they are completed properly, or sign them in the financial institution’s own office.
- Move your accounts. No, really—just say no to banks and financial institutions which may make your family members do back flips to handle simple transactions. If you are currently using a large international or national financial institution you may want to consider moving your accounts to a smaller, local financial institution. They tend to be more willing to accept state-approved power of attorney forms.
- Provide your agent with information about how to withdraw (or move) funds using the internet, debit cards and PIN numbers. Be very careful, however, about where this information is stored and to whom it is disclosed. If you are the agent and you have the password or PIN, consider using it to move the entire balance to a more cooperative and user-friendly bank. As noted above, they do exist. Look first for locally-owned alternatives, or a bank and branch where you are well known.
- If you are already facing the bank’s refusal and the principal is already incapacitated, then try to work up the chain of command. Insist that the teller you are dealing with bring in the branch manager. Demand that the branch manager call the bank’s legal department. Do not become abusive, as that will give them just the excuse they need to tune you out. But be persistent and insistent. No matter what they say, there is no state law or banking regulation that requires the use of their in-house forms.
- Consult a lawyer. One of the primary reasons you signed a power of attorney was to avoid the legal costs of guardianship, but a lawyer may be able to navigate the bank thicket without having to file anything in court. There is no guarantee that even your attorney’s appeals will work — but it does sometimes work.
- Make sure that your power of attorney is renewed periodically; I suggest every five years, to make sure it will not be considered “stale” by third parties asked to rely on it.
- If you spend your time in various states, set up durable powers of attorney that comply with the state laws in each place. Financial institutions are supposed to honor out-of-state documents but if you are dealing with a bank teller, he might not recognize and be willing to accept an out-of-state document.
- Consider setting up a revocable inter-vivos trust to provide for the management of assets during a period of incapacity or disability in case the power of attorney approach breaks down and third parties will not accept the agent’s authority.
Dealing with financial institutions can be frustrating. As fraud by agents proliferates and as the financial industry continues to consolidate and to favor efficiency over personalized service, the frustration is likely to grow. Even in the face of that mounting frustration, however, it is critical that you complete your planning, and urge your parents, spouse and loved ones to do the same.