Posted by:  Cynthia Tolan

You think you’ve done everything right: Your parents or other relatives have signed a durable power of attorney. Among other things, it allows you to handle their finances — taxes, bills, bank accounts, real estate sales — if they become incapacitated. Then the time comes when older family members can no longer manage transactions on their own. You take the witnessed and notarized document to a financial institution — a big brokerage firm like Wells Fargo or Ameriprise, or a national or regional bank or credit union. And officials say no, they won’t honor your power of attorney. They insist that the account owners sign the institution’s own power of attorney form — very unwelcome news, because by now the older account holders may not be competent to sign legal forms. That’s why you’re there in the first place.

It’s not clear how often similar scenarios, with their Catch-22 absurdity, take place. But Elder Law attorneys across the country say they have encountered financial institutions unwilling to honor valid powers of attorney.
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Even in states where statutes require banks to accept a durable power of attorney, or waive their liability when they do accept it, elder-law attorneys have seen some balk.

“Numerous clients have had this dilemma,” said Bernard Krooks, a founding partner of Littman Krooks in New York. “They listened to all the pundits and drew up the documents. Then the bank says, ‘That’s very nice, but it’s not our form.’” Financial industry executives said they couldn’t provide estimates of how many banks and brokerages insist on their own power of attorney forms, but “I don’t think it’s uncommon,” said Nessa Feddis, the American Bankers Association senior vice president for consumer protection.

She defended the practice. “Banks hold important assets,” she said. “They have to be very careful when someone is asking for access to a customer’s account.”  You can see her point: Government agencies and advocacy groups increasingly warn about the financial exploitation of older adults, especially those with cognitive impairment; the perpetrators are often family members.  Some financial institutions now train staff members, who should indeed be alert to abuse, to recognize signs of diminished capacity.

But banks have other motivations, too. “Typically, when they’re insisting on their own forms, they’re concerned about liability,” Ms. Feddis said.  If Nefarious Nephew A illicitly drains a senior’s account to buy a Ferrari, Upright Nephew B might sue the bank. Sometimes, too, banks dismiss a power of attorney as being “stale” — signed too long ago — or for other reasons.

The Financial Industry Regulatory Authority, the nongovernmental organization overseeing securities firms, recently issued an investor alert about powers of attorney. It cautioned, among other things, that you may need a firm’s own form.

What can exasperated families do? One avenue: A lawyer can often cajole, reason or badger banks and brokerages into honoring valid powers of attorney by going above local managers to higher-ups.  You can be proactive by asking a brokerage or bank if it requires its own durable power of attorney document and, if it does, having your relatives sign it when they are still capable of doing so. You’ll have to do this for every institution where they have an account.  But read those bank forms carefully or have a lawyer review them.

Though it’s usually unnecessary, lawyers must go to court sometimes to make financial institutions accept a power of attorney. Stonewalled families have had to petition to become their relatives’ guardians or conservators — a long, expensive process — when all they wanted was to pay their bills.

Our firm is dedicated to helping seniors and their loved ones work through issues and implement sound legal planning to address them. If we can help in any way, please don’t hesitate to contact our office at (630) 221-1755.