Jewish World Review May 24, 2004 /4 Sivan, 5764
Jan L. Warner & Jan Collins
Can banks reject powers of attorney?
Q: Our parents always wanted to make sure they had their "ducks in a row" when it came to planning for incapacity and death. They met with my sister and I several times, explained what they had, where it was located, and how they wanted things done should either or both of them become incapacitated or die.
Since Mom was not involved in the financial end of the marriage, my sister and I were named as our parents' agents. We were given recorded copies of their durable powers of attorney, duplicate originals of their wills and health powers of attorney, and keys to their safe deposit box. Their lawyer assured us and them that every possible contingency had been covered. Because our folks had done business with the same bank for more than 20 years, none of us thought we had any reason to be concerned that is, until Dad suffered a debilitating stroke. Dad was discharged from the hospital into a nursing home for rehab, and Mom, not wanting to be far away from him, insisted that she be checked into a nearby assisted-living facility.
That's when my sister and I got the second shock: When we took our parents' powers of attorney to their long-time bank, the first order of business was for the branch manager to send the documents to their legal counsel. After several days of not being able to access our parents' funds, the bank refused to accept the powers of attorney because their lawyers said the documents were too old (five years). The manager would not allow my sister or I to place our names on any accounts or to have access to any funds to pay for our folks' care. They insisted that our father who could not recognize his own wife or us, and who is paralyzed could either sign an updated power of attorney or be brought to the bank so they could see him sign a new signature card.
While Mom could access the checking account, there was not enough money to pay for their care. We finally were able to use their credit card to get an advance for the first month, but the bank won't budge. Why is it that banks can get away with this, and what is our best course of action?
A: We believe the bank's position is preposterous and amounts to a serious breach of its responsibilities to your parents. The law in most states includes safeguards that protect banks and others who rely upon recorded durable powers of attorney from liability. In fact, if a bank relies on a durable power of attorney that contains requisite grants of authority, the bank is neither liable for allowing the agent to exercise that authority nor responsible to make sure that the funds taken from the accounts are properly applied.
While some banks require certified copies of the powers of attorney, others who know the family may only require a copy.
Bottom Line: A durable power of attorney that complies with state law must be accepted unless/until it is revoked. It this was not the case, why should people plan?
So how can banks refuse to accept valid powers of attorney? While some put verbiage in their account agreements that most customers never bother to read, others have "unwritten" rules that are apparently dreamed up by lawyers who work for the bank as risk-management tools but which probably put the bank at greater risk of liability. We believe, however, that the vast majority of power of attorney turndowns are illegal.
How can others avoid the problem? Provide the bank with copies of the durable powers of attorney in advance of any illness. Get a letter from the bank stating that the document you submitted will be accepted and hope that the person who gives it to you is still with the bank when you need to use it. And have the agents' names added to all accounts "as agent" before an illness strikes. By titling the account in this fashion, no ownership rights vest in the agents.
Some banks and brokerage houses require customers to sign their own power of attorney form to allow others to deal with customer accounts. Generally, we see nothing wrong with these short-form powers of attorney so long as they don't revoke, but simply enhance, the provisions of your power of attorney.
What can you do? Aside from talking to banking officials who do not have the authority to resolve your problem, you can have your parents' lawyer write the bank and insist that your parents' documents be accepted. If they continue to refuse, we suggest that you consider bringing a legal action against the bank as the ongoing damages to your folks could be significant.
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JAN L. WARNER received his A.B. and J.D. degrees from the University of South Carolina and earned a Master of Legal Letters (L.L.M.) in Taxation from the Emory University School of Law in Atlanta, Georgia. He is a frequent lecturer at legal education and public information programs throughout the United States. His articles have been published in national and state legal publications. Jan Collins began co-authoring Flying SoloŽ in 1989. She has more than 27 years of experience as a journalist, writer, and editor. To comment or ask a question, please click here.
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© 2003, Jan Warner