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By Mia H. Lahti
For years we’ve been telling our clients to sign and update durable powers of attorney. The reason is that older powers of attorney can become “stale”.
We found an article in the New York Times last month that sheds light on new problems that can still arise after you’ve updated and signed a “POA”. The article discussed how occasionally financial institutions will not honor a POA that’s not on the institution’s own form.
The article points out the “Catch-22” situation that arises when a person signs a POA anticipating incapacity. But if that POA isn’t honored by a financial institution, and the individual is now incapacitated, then it’s too late to sign another POA. These financial institutions sometimes insist on clients using the institution’s own forms.The reasons that some financial institutions insist on their own forms is to avoid the financial exploitation of older adults, and for liability reasons.
The Financial Industry Regulatory Authority is a nongovernmental organization that oversees securities firms, and it has recently issued an investor alert. In that alert it cautioned that people may need to use a financial firm’s own POA form. So the question is then, what can be done if a financial institution says that it won’t accept your POA, but the person who signed the POA is incapacitated? One approach is to have a lawyer put pressure on the bank or financial firm by going above local managers, and appealing to senior management.
Another approach is to ask your bank and/or financial firm in advance if it requires its own durable POA, and then sign it in advance. However, such forms should be reviewed by your attorney first, to ensure that they don’t conflict with your original durable POA.
On rare occasions, individuals have needed to take the costly and time consuming approach of going to court to make a financial institution accept their POA. In another situation, mentioned in the article, a family member merely waited for his mother to have a lucid day, and then had her sign the financial institution’s document, when they would not accept his mother’s original POA.
Of course, another solution is to do a living trust, and fund it. Living trusts do not have the problems of powers of attorney, and are “vetted” at the inception when the account is set up. This is another, lesser known, but very powerful reason to use a “trust based” plan in lieu of a “will based” plan.