Mon, 13 July 2009
As I often tell clients, one of the most important documents that everyone should have is a power of attorney. A power of attorney allows you to designate someone to conduct financial and other transactions on your behalf. The ease with which anyone can execute such a document is a positive but can also be a negative because of the risk of it being abused. And therein lies the problem when it comes to being accepted by a third party, such as a financial institution or bank.
When we prepare a power of attorney for a client we draft it with the client’s needs in mind as well as the mindset that we may not have another opportunity to redo it later so it must be as broad as necessary to cover all possible scenarios in which it may be used by the agent. We also tell clients that when their agent presents the document to a bank or other financial institution the first reaction may be that the bank will want our client (the “principal”, that is, the person signing the power of attorney in favor of the “agent”) to execute another power of attorney on their own form.
The bank’s reason is usually a concern about liability – being sued for honoring an invalid power of attorney. However, the law provides a measure of protection for both the principal and the bank. New Jersey law states that a bank must accept a power of attorney that conforms to the law unless the principal’s signature is not genuine or the bank has actual notice that the principal has died, the power of attorney has been revoked or the principal was under a disability when the document was signed, meaning he/she wasn’t competent to sign it.
The problem presented to clients is that the bank employee is usually following bank policy set by their legal department that they want the principal to sign their own document, typically in front of one of their own employees. Obviously, this makes it easier for them to be sure the document is valid but it frustrates the purpose and benefit of the law, that the principal can sign one document to cover all scenarios. Persistence with the bank employee and sometimes intervention by the elder law attorney will usually overcome this resistance and convince the bank to honor a valid power of attorney.
It helps to know a little bit about the law because the person you are dealing with at the bank probably doesn’t and will tell you they are simply “following bank policy”. But this policy is not at all helpful to the client, especially in situations in which physical frailties prevent him/her from physically appearing at each bank to execute a separate power of attorney. That’s not to say that there aren’t legitimate concerns about agents abusing their power. It’s just that a “one size fits all” approach is the easy way out, instead of a careful examination of the facts of each case.
Category:Long term care planning -- posted at: 6:00am EST