Top Five Reasons Banks Won’t Accept a Power of Attorney and What You Can Do About It

Q. My aunt signed a Power of Attorney naming her son, my cousin Andy, as her POA. When Andy took it to the bank, he was told that the document had to be on the bank’s form to be valid. This happened in Texas, but I’m concerned that the same thing could happen anywhere. What can be done if a bank refuses to accept a POA, and what can be done to prevent it from happening?

A. There’s no shortage of stories about banks and financial institutions refusing to honor Power of Attorney (POA) documents (and yes, a POA is always a document, never a person; the person named in the POA document who is authorized to act in accordance with the terms of the POA document is called the “agent” or “attorney in fact” — most banks and even some attorneys these days incorrectly call this person the POA, but this is never accurate, as the POA is always a document). To avoid ending up in a situation like your cousin, it’s important to understand why financial institutions might not accept a POA and what you can do to increase the chances that they will. By the way, when you sign a POA, you can terminate it at any time, and it’s automatically terminated when you die.

Why Banks Require Power of Attorney Documents

Banks, credit unions, and other financial institutions take their obligation to protect customers and their privacy seriously. Banks are also supposed to do what they can to protect senior customers from potential elder financial exploitation. So before giving anyone access to a customer’s account, they want to ensure that the necessary legal prerequisites are met. This means confirming that someone has been legally named as an agent under a POA or as a court-appointed conservator.

Even if your loved one has signed a legal document naming you as their agent and giving you the power to make financial transactions on their behalf, you can’t expect their bank to take your word for it. You’ll need to provide a genuine, valid, and still-in-effect POA document to the financial institution that specifically give you the power to do whatever it is you’re trying to do. But even when you do present such a document, the bank may still not accept it. When that happens, what can you do?

Many don’t realize that there can be legal consequences if a bank wrongfully refuses to accept a valid POA. In several states, including Virginia and Maryland, statutes have been passed requiring that banks accept a Power of Attorney under certain circumstances. In Virginia, a bank must accept a notarized Power of Attorney unless a statutory exception applies. Unfortunately, one very broad statutory exception is that a bank is not required to accept a Power of Attorney if it believes in good faith that the agent does not have the authority specified in the document or that the agent has been relieved of his authority.

Five Common Reasons Why Banks Won’t Accept a Power of Attorney

To delve deeper into what was described above, there are a variety of reasons why banks might reject a POA. Here are the five most common ones:

With a “springing” POA, the banker or other financial entity might not accept the agent’s authority, even if a physician(s) signs a letter stating that you are unable to make decisions for yourself. The institution might want some confirmation that the signatures of the physician(s) are genuine, and maybe even some reassurance that the physicians have made the correct diagnosis, or the institution might even question whether the alleged incapacity is permanent or whether perhaps you have gotten better since the doctor signed the letter of incapacity.

How to Avoid Issues with Getting a POA Accepted

To be an effective planning tool, a POA has to be accepted by the bank, broker, or other third party to whom it is tendered. If the bank won’t accept the document, the agent should get the drafting attorney involved to write a letter to the bank threatening litigation if the bank continues to refuse to accept the power of attorney. Usually this works, but if this does not work, then an agent will be forced to either go to court against the bank to try to force the bank to accept the POA, or to go to court to get the incapacitated person declared to be legally incapacitated in order to obtain authority to manage the principal’s financial affairs through a court-ordered conservatorship, thus beginning the process of lifetime probate, which the POA was designed to avoid.

How to Head Off POA Problems Before They Happen

Before you run into trouble with a bank rejecting a POA during an intensive caregiving time, you and your loved one may want to visit the bank while everyone is healthy and doing well. You can ask that the bank put the POA on file and double-check that it meets the bank’s requirements for approval.

When to Escalate the Issue if a Bank Refuses Your POA

If you present a valid POA and are still being asked for additional information by the bank, it may be part of their internal policy or a legal requirement. For example, if the POA doesn’t take effect until the principal is incapacitated, as described above, the agent may need a doctor to certify that the POA maker is unable to handle his or her own affairs.

However, even if the bank says they want the account holder to use one of the bank’s POA forms, they still cannot reject a POA that is legally effective and has the correct language giving the agent the right to conduct banking transactions for the principal.

Your attorney can assist with communicating with bank counsel or other bank representatives. Your attorney may also formally record the document in the county and present the certified copy of it to the bank with an opinion letter verifying the validity of the POA.

Why Every Adult Needs a Power of Attorney

Whether or not you believe you will be sick or unable to make important decisions someday, you never know what can happen or when it will happen. That’s why every adult should have both a Financial POA and an Advance Medicaid Directive (which includes a Medical POA) in place. Signing these documents is called incapacity planning and is an integral part of any comprehensive estate planning. POAs offer the peace of mind that someone you appoint can step in if and when needed to handle your legal and financial affairs and health care decisions. If you have not done incapacity planning or estate planning yourself, or if you have a loved one who has not done it, the time to plan is now. Please contact us at any time to make an appointment:

Power of Attorney Lawyer Fairfax: 703-691-1888
Power of Attorney Lawyer Fredericksburg: 540-479-1435
Power of Attorney Lawyer Rockville: 301-519-8041
Power of Attorney Lawyer DC: 202-587-2797