Why Banks and Other Financial Institutions Sometimes Refuse a Financial Power of Attorney
You finally convinced your aging mother to execute a financial power of attorney (POA). You worked together to plan for the unexpected and thought that you had all your bases covered. Unfortunately, now your mom has become incapacitated and the bank is refusing to authorize access to her accounts. How can the bank do this if you’ve been legally granted financial power of attorney?
Who Do Banks Refuse a Financial Power of Attorney?
Here are three of the most common reasons a bank might refuse a financial power of attorney.
The financial POA is not durable
If the financial POA appointing you as the agent is not “durable,” it will only be valid while your mother (known as the principal) is of sound mind. A durable POA, on the other hand, continues to be effective after the principal becomes incapacitated and can no longer manage her finances.
The POA is “springing” and has not been activated
If a POA is springing, it only becomes effective when the principal becomes incapacitated. In this case, your mother’s incapacity must be proven according to the terms outlined in the POA document. A generic springing POA will typically stipulate that at least one doctor has examined the principal and determined that she is unable to manage financial affairs. In such a situation, the bank will want to see the POA, together with the doctor’s diagnosis and any other documents necessary to satisfy the requirements for activating the springing POA.
The POA is “stale.”
A bank may refuse to grant the agent access to the principal’s bank account because it determines that the POA is too old. Simply put, the legal concept of “staleness” implies that if a document such as a POA is old there is a chance the principal has revoked its power or signed a new POA to replace the old one. This is why the powers of attorney should be kept “fresh” by signing new ones at least every five years.
How To Respond if a Bank Rejects a POA
It’s important to understand that when a bank refuses to accept a POA, it’s not necessarily being “difficult” or unreasonable. The bank can be sued if it allows the wrong person to access an account, or grants access under the wrong circumstances. Of course, the bank also wants to protect its customers’ funds. If the bank proves recalcitrant, however, hiring an attorney to make a phone call or send a sternly worded letter to the bank manager will likely resolve the issue.
Working with an experienced estate planning attorney to create a comprehensive and robust durable financial power of attorney may very well prevent the frustrating scenario described above from happening in the first place. Another option is to create a trust and name a person to assume management of trust assets in the event of the trustmaker’s disability. This should remove most, if not all, of the objections a third party may have when the person chosen to manage assets takes over.
Experienced Estate Planning Attorney to Help Advise You
Clifford M. Cohen has more than 35 years of experience and dedicates his practice to guiding aging individuals in the Maryland and D.C. area through all facets of estate planning law. Contact us today at 202-895-2799 for a free case evaluation.
