For Jacksonville residents who have been married or in a longstanding relationship, it’s almost certain…
Can a bank refuse a Power of Attorney?
Can a Bank Refuse a Power of Attorney? Yes, they can! If you are you going to manage your parents’ finances in the future, Power of Attorney gives you some power. however, the banks may not trust you and you need to plan for that.
They aren’t just throwing their power around because they can. Banks have a responsibility to protect people’s finances. Most of us have heard or read stories about fraud, theft of seniors’ savings, and financial abuse (with the equally disturbing fact that family members are usually the culprit).
It is an especially tough job for banks these days. With online banking and banking machines, you and your parents may be unknown to them outside of an online account or two.
Because of this unfamiliarity, sometimes the pendulum swings too far and the bank refuses to recognize legitimate Powers of Attorney. Having a Power of Attorney created by an experienced Attorney is crucial. Sometimes a Power of Attorney can lack clarity. A seasoned Attorney who specializes in Estate Planning is sure to create a document that reads easily and clearly so the bank and other financial institutions have no cause for concern. Keeping the Power of Attorney current and up to date is also vital. Again, checking in with the Attorney who originally created your Power of Attorney is key. He or she may have to update some legal language if your Power Attorney becomes out dated over several years. Typically a bank or financial institution has their own legal department. When an issue arises, it is advantageous for you to have an attorney with the philosophy of continuing care. So many Attorney’s practice “one and done” types of transactions, or “Here is your document, goodbye” tactics. When choosing an attorney, make sure he or she has adopted a good attorney/client relationship with you, and that they are willing to consult with you and be available to you if any changes need to be made.
Why banks reject a Power of Attorney
Banks can refuse to accept a Power of Attorney because:
- It is old
- It lacks clarity
- It doesn’t conform to the bank’s internal policies
If you think that the above reasons are rather vague, I couldn’t agree more. I have had clients’ POA refused because:
- They had never met the son who had the POA
- The POA was over 10 years old
- The person with the account didn’t arrange to sign the bank’s own internal papers
- The parent was not physically able to go to the bank to verify they gave their daughter a POA
- A sibling called the bank and said this was a case of financial abuse
All of the POAs presented to the bank were legitimate.
Always use a lawyer to create your Power of Attorney. Banks can be even more suspicious with do-it-yourself POAs. It is also advisable to have a lawyer complete your POA if there is even a hint of conflict between siblings (and this is no time to be naïve or sentimental).
This isn’t fear-mongering or a tirade against the banks (that would be too easy, wouldn’t it?). There have simply been too many experiences with sons and daughters who have had a legitimate POA denied by the bank. You can imagine the stress involved under this situation. The banks can freeze accounts, in order to investigate “suspicious activity”. This can even make it difficult to pay bills (yes you read that right, difficult to put money into the account and pay bills).
If suspicious, the banks can ask for a capacity assessment to be completed or a letter from the family doctor confirming that your parent is capable. While inconvenient and sometimes costly, this is not always possible, as sons and daughters are involved only when their parent becomes incapable of managing their finances themselves.
What to do when a bank refuses your POA
Banks are now obligated to provide recourse to clients (your parents) or attorneys when they refuse to act on a POA or attorney’s (you as son or daughter) instructions. The Advocacy Centre for the Elderly (ACE) recommends the following steps in the face of a refusal to do so.
- Client or attorney should first consult more information.
- If unresolved, escalate to the Consumer Financial Protection Bureau
- Consult a lawyer.
It can be quite challenging, not to mention time consuming and exasperating to try resolve the issue of POAs not being recognized by the banks.
It doesn’t have to play out this way. You and your parents can be proactive and prevent this problem!
Take these steps to get your POA recognized by the bank
- Do it early, when there is no question of capacity.
- Go to the branch with your parents. Have your parents introduce you to the Bank Manager.
- Take the POA to the bank and have it reviewed and accepted. If there are problems with it from the bank’s perspective, these can be addressed while there is no question of capacity.
- Your parents should ask the bank if they also have their own internal documentation required, which will give someone the power to manage their finances.
Read more related articles at:
Also, read one of our previous Blogs here:
Click here to check out our On Demand Video about Estate Planning.18