A durable power of attorney is a legal document that authorizes a named agent to manage the finances of a principal. It enables the agent to interact with banks and institutions where the principal has financial accounts. While it is important to execute a legally sound durable power of attorney, it is equally necessary to ensure that financial institutions will accept the document. Generally, banks are obligated to honor a valid durable power of attorney. However, financial institutions can still refuse the document for policy or protective reasons.
A bank’s right to refuse a power of attorney is grounded in its unique position to prevent fraud and elder abuse. A financial power of attorney is a powerful document that grants another individual unfettered access to the owner’s account. Because of this, state and federal agencies encourage banks to actively use their position to monitor client activity and enforce employee training programs on the signs of suspicious behavior. This initiative empowers bank employees to scrutinize powers of attorney and reject documents that appear suspicious or lack credibility.
Reasons a financial institution may reject a financial power of attorney include:
- The financial power of attorney is considered too “stale” because it was executed several years earlier. Legally, a durable power of attorney does not expire until it is revoked by the principal or the principal dies. However, there is concern that an older power of attorney has not been updated and names an agent that the principal no longer wants. For these reasons, banks are less inclined to accept an older power of attorney. The number of years that makes the document “stale” varies and depends on the financial institution.
- The financial institution has additional rules and procedures to follow for the protection of the account owner. Banks may reject a power of attorney because the account owner did not execute the document on the institution’s form. Banks may also have their own document verification process or require a meeting with the attorney-in-fact and principal while the principal still has capacity. Failing to complete these steps may render the power of attorney unacceptable.
- If a durable power of attorney springs into effect upon the principal’s incapacity, the financial institution may require documentation from physicians to confirm that medical conclusion.
Principals should be proactive and reach out to any bank or financial institutions where they have accounts and inquire about specific requirements regarding a power of attorney. The purpose of these steps is to ensure that there are no surprises when the agent needs to utilize the durable power of attorney to access the principal’s account. Modifications can only be made while the principal has capacity. Therefore, it is imperative to verify with your financial institution that your durable power of attorney aligns with its policies.
