trying to put a Power Of Attorney in place so that I can manage my elderly fathers' finances. On January 14th I submitted my documents to the bank in a face-to-face meeting at one of their branches. My father received a letter from them on the 11th that they couldn't accept the POA without an "original notary seal"
In this post, I'm going to go over what happens when a POA that has been properly signed is, nonetheless, not recognized. For sake of illustration, let's say that your elderly mother has signed a POA naming you as her agent. Your mom wants you to manage her money (e.g. pay her bills) and to do that, you need to access her bank accounts, but your mom's bank is refusing to cooperate with you. What do you do?
The California statute that applies here is
Section 4406 of the California Probate Code. One important thing to recognize first, though, is that 4406 only applies to what are called "Uniform Statutory Powers of Attorney". What this basically means is that 4406 doesn't apply to any random POA that gets written up, even if it's written up properly. 4406 only applies to the specific POA that is explicitly specified in the California Probate Code (specifically,
section 4401).
If you have a Uniform Statutory Power of Attorney in California and it's been properly signed by the principal (see
CA Probate Code section 4121) and a third-party (e.g. a bank, like in this hypothetical) is refusing to honor it, 4406 provides for the following:
- The agent can sue the third-party to force them to honor the Uniform Statutory Power of Attorney, provided that the principal would have had the ability to do the same;
- That if this third-party is indeed sued in this way, they must pay attorney's fees for this suit if the court finds that the third-party's refusal is unreasonable in light of the situation;
- f the third-party's refusal to honor the Uniform Statutory Power of Attorney is somehow authorized by state or federal law or regulation, then then the third-party's refusal is not unreasonable;
- However, if the third-party's only reason for refusing to honor the Uniform Statutory Power of Attorney is that it was not on the correct form that the third-party desires, that refusal is unreasonable.
Hope that helps. I personally have not encountered instances myself where a properly-signed Uniform Statutory Power of Attorney has not been recognized. Every bank I have ever dealt with, for instance, has been big enough to afford armies of lawyers who know their state's POA laws so improper refusal is — again, in my experience — pretty rare. If a bank does refuse to honor a POA, for instance, I would assume it's because the POA was signed improperly (e.g. there's no date on it as, for instance,
Section 4121(a) of the CA Probate Code requires).
As always, this blog post is meant to be short and sweet. My goal is only to highlight one particular question or problem that may occur in the real world. This is definitely not meant to be a comprehensive discussion. If you have a situation similar to the one described here, please do find a lawyer in your area to go over what would be the best course of action for your particular situation.
Q. My cousin's parents executed a Power of Attorney naming her and her sister as co-agents. My aunt is now deceased. My uncle, who has dementia, is owner of an investment portfolio with monthly dividends being automatically reinvested. My cousins wish to have the dividends placed into my uncle's checking account so that they may use the funds for monthly fees at a memory-care center. Wells Fargo recently told them that they will not honor the Power of Attorney because it is a 'joint' Power of Attorney. Apparently the bank would honor the Power of Attorney if the document specified that my cousin or her sister were able to act alone. My uncle can no longer sign his name in order to modify the existing Power of Attorney. Can the bank do that, and how can I avoid it happening to me, should I find myself in a similar situation?
A. A properly-drafted
Financial Power of Attorney is the most important legal documents that a person can have, and is an essential part of every Incapacity Plan and Estate Plan. It authorizes an agent, sometimes called "Attorney-in-Fact," to act on your behalf and sign your name to financial and/or legal documents.
Several states, including Virginia and Maryland, have passed statutes requiring that banks accept a Power of Attorney under certain circumstances. In Virginia, a bank must accept a notarized Power of Attorney unless a statutory exception applies. Unfortunately, one very broad statutory exception is that a bank is not required to accept a Power of Attorney if it believes in good faith that the agent does not have the authority specified in the document or that the agent has been relieved of his authority.
To protect themselves from liability, banks, especially large banks such as Wells Fargo, have been known to reject powers of attorney, for fear of being parties to fraud. For instance, some banks, including Wells Fargo, have started rejecting documents that were signed more than twelve months ago, that are from out of state, or for other reasons, making it much tougher for well-meaning adult children to take the reins when their parents' health falters.
So, even with the best power-of-attorney documents, it's sometimes still hard to get some banks to honor them because of liability concerns. However, there are ways to draft these legal documents to improve the chances that banks will honor them—and that loved ones won't misuse them. But it takes careful planning with an experienced Elder Law Attorney such as myself. So what can you do to make sure your Power of Attorney doesn't spark tussles with banks?
- Set it up early: It is prudent to set up a Power of Attorney while you are still healthy and in full control of your faculties. You need to be comfortable with the person to whom you're giving Power of Attorney, since it generally can be invoked at any time. You need to decide whether to make the powers you authorize narrow or broad, make sure you trust the person you're granting them to, and understand when these powers take effect.
- Set it up with the Right Attorney: Every power of attorney document is different, and most power of attorney documents are not worth the paper they are written on. There is no standard "form" that you can download from the Internet or obtain from some online legal services provider that is going to be suitable for your specific needs. I review an average of ten power of attorney documents every week that have been done by people on their own, or prepared by attorneys who are not experts in Elder Law. Invariably, I must prepare a new power of attorney because the ones presented to me are almost always severely lacking important / essential provisions. It is much simpler and less expensive to get it done properly the first time then to have to pay twice to have a bad document redone and then have the hassle of going back to various financial institutions and your agents in order to replace your old power of attorney with your new one.
- Get a Capacity Evaluation: If you are over 62 and if you think that the day might possibly come in the future where you might need a reverse mortgage, then shortly after signing your power of attorney, you should have a competency evaluation done by your doctor to confirm that you were competent to sign the power of attorney. This document, which we provide to our clients, will be required in the future by any reverse mortgage lender if your agent tries to use your power of attorney to obtain a reverse mortgage for your benefit, such as to pay for in-home healthcare to prevent you from having to move to an assisted living facility or nursing home.
- Keep It Current: The best way to avoid pushback from banks, brokerages, fund companies, and other asset-holders is to renew/update your Power of Attorney every year. Our firm offers a Lifetime Protection Program whereby we will update your POA every year, along with lots of other legal services. For example, if you are a client under our Lifetime Protection Program, we will fight the bank for you if a bank refuses to honor your power of attorney.
- Avoid Co-Agents Who Are Required to Act Jointly: Having co-agents is fine if the two agents get along well and will not work at cross-purposes, but have the POA drafted so that either agent can act separately. This way you will not run into the problem that you have currently found yourself in. Banks do not want to honor a joint power of attorney were both agents must sign because banks do not want to be responsible for policing this "double signature" requirement.
- Set up a Revocable Living Trust: The purpose of a Power of Attorney is to avoid the nightmare of lifetime probate if you also want to avoid the nightmare of after-death probate, you should set up a Revocable Living Trust (RLT), because a Will puts your estate through the nightmare of after-death probate. An RLT also offers protection from incapacity by providing uninterrupted management of your trust assets by your trustee.
Problems with Wells Fargo
As you may have heard in recent news, Wells Fargo is being sued for participating in illegal practices such as requiring customers wanting one product to purchase additional ones. The lawsuit also alleges the bank is allowing bankers to create debit card PIN numbers, often without customer authorization, to enroll a customer in online banking, charging bogus fees, and delaying the opening of new accounts or processing a sale until a time that is most beneficial to the bank.
If you are a Wells Fargo customer, be sure to review your banking accounts and records, and check your credit report. Check to see if there are any unauthorized checking and saving accounts in your name, and if accounts you thought you closed remained opened.
Also, beware if you are a Wells Fargo customer, that I have heard of them not only refusing to accepting valid Powers of Attorney, but also refusing to accept court orders establishing someone as a conservator, and refusing to honor the ability of a successor trustee of a trust to access trust funds. It is important to consider this when you are doing your planning and thinking about the future.
Q. My cousin’s parents executed a Power of Attorney naming her and her sister as co-agents. My aunt is now deceased. My uncle, who has dementia, is owner of an investment portfolio with monthly dividends being automatically reinvested. My cousins wish to have the dividends placed into my uncle’s...
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