by Terri North, Legal Strategies, PC
Legal Strategies receives many phone calls after a child starts handling her parents' affairs. Often the child is frustrated because a bank or financial broker is refusing to accept a power of attorney, and the child cannot get control of the assets needed to pay her parents' bills.
Below are some of the common reasons that a power of attorney might be rejected. If any of these are true of your power of attorney, then you should get it updated before your agent needs to use it.
1) The Power of Attorney is not yet in effect. Some people have what is known as a springing power of attorney. which means that it doesn't take effect until the person who signs it is disabled. A "disability" occurs when two doctors have said so. But many banks and financial institutions are uncomfortable determining the validity of letters from doctors. Are the letters from the doctors who actually treat mom or dad on a regular basis? When did these doctors last evaluate the patient? The bank may not want to risk releasing money to the agent to later find out that the customer wasn't really disabled, and the power of attorney really didn't spring into effect. There is less risk to the bank to simply reject the power of attorney.
2) The Power of Attorney is too narrow. The general rule of law is that a power of attorney has to be specific about what powers are being delegated to the agent. For example, if the power of attorney says that the agent can "borrow" money that may not satisfy a mortgage company that the agent can sign mortgage documents, or a refinance an existing mortgage. If the power of attorney has only 2 or 3 pages of powers, the chances are good that it does not specifically delegate all the powers that the agent may need.
3) The Power of Attorney is too old. Many banks and financial institutions are uncomfortable accepting a power of attorney that is more than 5 years old. They are concerned that it has been revoked, or that a newer power of attorney exists with different agents. Often, the bank will ask the person who signed the power of attorney to reaffirm that it is still in effect, which can be difficult if the person can no longer sign his name, or has dementia, etc.
4) The assets are in a Trust. Once an assetis transferred to Trust, then only a Trustee has power over that asset. A general power of attorney is a delegation of an individual's power, not a Trustee's power. If you have assets in your trust, you need a Trustee's power of attorney in order to delegate the power to handle Trust assets.
If your family needs to manage your assets, and your power of attorney is rejected, then you may need to sign new documents. If you cannot do so because of a disability, then your family may be forced to go to probate court to be appointed conservator (or successor trustee). It is safer to review your documents in advance and make sure your family has all the tools that they may need in the event of your disability.
*This blog was originally posted by Legal Strategies, PC.