What if a bank or some other institution will not accept a valid Power of Attorney?
As an estate planning attorney in Arizona, I’ve seen many situations where banks and other institutions have refused to honor a Power of Attorney that I drafted and executed for a client. The situation can begin when a family member calls to tell me that their loved one, my client, has become incapacitated. After reviewing the medical statements that my client is incapacitated, I instruct the family member on the steps they should take.
One of the steps includes going to the bank to gain control of the assets. Later, I receive a call from the family member, stating that the bank won’t honor the power of attorney. Over the last years, I’ve seen this situation repeat itself over and over again. Recently, I’ve even heard where a real estate title insurers that won’t provide a title insurance policy if an agent under a power of attorney wants to sell a home. They are afraid of being sued later if the power of attorney is found to be invalid. They feel they are better off refusing to honor it.
If a bank or title insurance policy refuse to honor a legal power of attorney, there is very little that can practically be done to force them. However, sometimes enough information can be provided to change their mind. The bank needs to be given enough information to trust that the power or attorney is valid and that they will bear no risk in allowing the agent under the power of attorney access to the money. If they are comfortable that there will be no liability, then they may honor the power of attorney.
Without such assurances, there is really only one solution. A court action is required in the form of a guardianship or conservatorship. Conservatorship over money and property could cost in excess of $10,000.00 in legal fees and costs in the first year alone. And, it costs thousands every year after that.
Banks aren’t the problems, though. The problem is that people and planners don’t know about or ignore the traps that are out there. As always, the best solution is adequate preparation and planning before incapacity strikes. Banks will allow a power of attorney to act, but they have to be added onto the account with their forms, before incapacity.