A Durable Financial Power of Attorney is the centerpiece of many people’s incapacity plans. The Power of Attorney is intended to allow someone else – your agent – to make essential financial transactions for you in the event that you can no longer manage your own money. So Powers of Attorney are supposed to give your agent the ability to access your bank accounts to perform transactions such as writing checks from your accounts to pay your bills and tracking the balance in your accounts to prevent an overdraft.
But some agents are finding that banks will no longer allow them to exercise the authority granted to them by Powers of Attorney. Concerned over their liability, banks are increasingly denying an agent with Power of Attorney the ability to make transactions or even access account information. Not only does this thwart the incapacity plans of account-holders who signed Powers of Attorney, but if the bank refuses to honor a Power of Attorney after you have lost the ability to make your own financial decisions, there may be no one left who can manage the money in your bank accounts.
For instance, your agent can run into trouble if you simply signed a Power of Attorney drafted by your lawyer. That is because many banks are reluctant to accept “custom” Powers of Attorney. How can a bank employee with no legal training determine that a “custom” Power of Attorney is legal and correct? Such a document may have to be reviewed by the bank’s attorneys, which could take weeks or months, delaying your agent’s access to your accounts. Most banks have form Power of Attorney documents, printed on the bank’s stationery. If you use this form, which is already vetted by the bank’s legal department, your agent’s access to your account is less likely to be delayed. So if you make a Power of Attorney part of your incapacity plan, be sure to check with the banks and financial institutions where you hold accounts, to see whether they have their own form Power of Attorney and whether they will accept Powers of Attorney which are not on their form.
Even if you use the bank’s internal form, banks are becoming more reluctant to honor Powers or Attorney because they are concerned about their liability for elder financial abuse. The potential for this kind of abuse was recently brought to national attention by the larceny conviction of Brooke Astor’s son, who was able to steal more than $12 million from her using a Power of Attorney she gave him, while she was incapacitated due to declining health. As banks are all too aware, perfectly legal Powers of Attorney are increasingly being used for the illegal purpose of siphoning off assets from the bank accounts of older individuals. And banks are alarmed by the possibility that they will be accused of facilitating this kind of abuse. Some banks are so alarmed that they will not accept Powers of Attorney that are more than one year old. So if you use Powers of Attorney as part of your incapacity plan, be sure to sign a new one every year or so, in order to help ensure that your bank will accept it.
Given the increasing hesitancy of banks to accept Powers of Attorney, the safest incapacity plan may be not to rely on a Power of Attorney to give access to your accounts. Instead, you can put your money in a living trust, and assign a successor trustee to manage your money for you if you should become incapacitated. For more information about Powers of Attorney or Living Trusts, contact Christl@DeneckePlanning.com or see DeneckePlanning.com.
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