Why Banks Block a Power of Attorney
This two part series will provide a look at working with banks when creating a Power of Attorney and a comprehensive look at these type of planning documents. Before providing an overview of Powers of Attorney, let’s cut to the chase: banks frequently block legally executed Powers of Attorney. This is a fact, so let’s look at some viable solutions that may prevent weeks of a frustrating back and forth.
Understand that banks have a high interest in preventing fraud and abuse. If you start there, you will be on level ground and not stuck shouting at a bank employee for countless hours. While no one should be rude, don’t confuse this with being persistent, because that is the other half of the equation.
First, let’s look at a few reasons banks may refuse a Power of Attorney. The document may be outdated, improperly executed, or the contingent, incapacitating event has not occurred. Powers of Attorney should be updated periodically to reflect changes in Agent information, addresses, terms, or changes in the law. Old Powers of Attorney must be explicitly terminated and new ones should be stored in a safe place. Some of them should be filed with the local county recording office. If an incapacitating event has not occurred, that is specified in the document, then a bank will recognize that the document is not in effect. Additionally, if an individual has died, the Power of Attorney is terminated and has little to no legal effect.
Second, although a Power of Attorney is legally executed, individual financial institutions may have their own requirements. An account holder agrees to these requirements when opening an account, so don’t wast valuable time arguing, because you may need to save your strong arguments for another time. Often, banks have specialized forms or requirements that can accompany a notarized Power of Attorney. This step should occur at the beginning of drafting the document, NOT when it is needed to act.
Third, an Attorney-in-Fact can and should talk with an Attorney-at-Law to determine whether a bank may actually be liable for damages in refusing a Power of Attorney. Washington state law provides the following:
(3) A person [including corporation or business] that refuses in violation of this section to accept an acknowledged power of attorney is subject to:
(a) A court order mandating acceptance of the power of attorney; and
(b) Liability for reasonable attorneys’ fees and costs incurred in any action or proceeding that confirms the validity of the power of attorney or mandates acceptance of the power of attorney.
Where Can You Turn for Assistance
Attorneys, legal aid groups, financial institutions, and others should keep tabs on what banks require. It is an added bonus in estate planning when an attorney advises individuals to check with their financial institutions before paying hundreds of dollars executing a document that should have been accepted. Some banks even require the Principal and Agent to come in person and designate which accounts the Agent will have access to.
Finally, if all the procedures are followed, an attorney may be necessary to strongly encourage the bank to accept a legally, valid Power of Attorney. An additional step after executing the document, is to store a copy with the bank in question and make sure there are no other requirements. No one wants to be found in this tug-of-war when the Power of Attorney is needed to care for a loved one.
