Clients use valid Durable Power of Attorney (DPOA) for financial matters.
In some cases, a bank may refuse to honor a power of attorney. If this happens, you have options to ensure a POA becomes valid.
What Are The Reasons Why Banks Refuse to Honor A Power Of Attorney?
A POA grants authority to act on your behalf, including financial matters if incapacitated. However, banks may refuse to honor a power of attorney for various reasons:
The POA Is Not Valid
Banks may reject improperly executed POAs. A valid POA requires the principal’s signature in front of two witnesses and a notary.
Copies are usually as effective as the original.
The POA Hasn’t Been Activated
Some POAs activate only when the principal is incapacitated, known as a springing POA. Incapacitation is typically determined by physicians. To activate it, the bank may need the POA and a physician’s letter.
The POA Is Not Durable
For your agent to use the POA during your incapacitation, it must be durable, meaning it remains valid even when you’re incapacitated.
Some states default to durable POAs, but you should explicitly state it in the document if required.
The POA Is Too Old Or Stale
Despite proper preparation, the bank might deny access to your accounts if your POA is too old or considered stale.
Banks often assume an old document is no longer valid.
To prevent this, it’s important to periodically sign a new POA.
What If The Power Of Attorney Is Wrongfully Rejected?
Banks must respond to a POA within four business days.
They can’t insist on their POA form if the one you provide is valid and sufficient for your transactions.
What Can I Do If A Bank Rejects A POA?
Despite thorough preparation, issues may arise when validating your POA with the bank. Financial institutions are cautious to avoid unauthorized account access.
To prevent conflicts, consider these steps:
Research Your Bank’s POA Requirements
Research your bank’s POA requirements to defend against rejection. Meet your bank manager for insights.
Consulting a local estate planning attorney can help identify banks that are POA-friendly.
Obtaining this information in advance can prevent future issues for your agent.
Set Up The POA Early
Create your POA while mentally capable.
Plan to select your agent comfortably and specify the powers you grant, whether broad or narrow, as the POA can be activated at any time.
Choose The Right Attorney To Help You Set Up The POA
Don’t rely on generic online forms for your power of attorney; consult experts from law firms specializing in various areas like real estate, corporate, family, and personal injury law.
They can tailor the document to your needs, and while legal fees may concern you, the long-term benefits are typically worthwhile.
An Experienced Estate Planning Attorney Evaluating Your Power Of Attorney Document
A well-prepared POA should be acceptable to banks, but unforeseen issues can arise.
Minimize rejection risk by following proper steps during creation, with guidance from experienced estate planning lawyers.