What Happens If Power of Attorney Documents are Rejected?

It is frustrating when a bank or other financial institution declines a Power of Attorney. It might be that the form is too old, the bank wants their own form to be used, or there seems to be a question about the validity of the form. A recent article titled “What to know if your bank refuses your power of attorney” from The Mercury discusses the best way to prevent this situation, and if it occurs, how to fix it.

The most important thing to know is just downloading a form from the internet and hoping it works is always a bad idea. There are detailed rules and requirements about notices and acknowledgments and other requirements. Specific language is required. It is different from state to state. It’s not a big deal if the person who is giving the power of attorney is alive, well and mentally competent to get another POA created, but if they are physically or legally unable to sign a document, this becomes a problem.

There have been many laws and court cases that defined the specific language that must be used, how the document must be witnessed before it can be executed, etc. In one case in Pennsylvania, a state employee was given a power of attorney to sign by her husband. She was incapacitated at the time after a car accident and a stroke. He used the POA to change her retirement options and then filed for divorce.

At issue was whether she could present evidence that the POA was void when she signed it, invalidating her estranged husband’s option and his filing for her benefits.

The Pennsylvania Supreme Court found that a third party (the bank) could not rely on a void power of attorney submitted by an agent, even when the institution did not know that it was void at the time it was accepted. For banks, this was a clear sign that any POAs had to be vetted very carefully to avoid liability. There was a subsequent fix to the law that provided immunity to a bank or anyone who accepts a POA in good faith and without actual knowledge that it may be invalid. However, it includes the ability for a bank or other institution or person to request an agent’s certification or get an affidavit to ensure that the agent is acting with proper authority.

It may be better to have both a POA from a person and one that uses the bank or financial institution’s own form. It’s not required by law, but the person from the bank may be far more comfortable accepting both forms, because they know one has been through their legal department and won’t create a problem for the bank or for them as an employee.

There are occasions when it is necessary to fight the bank or financial institution’s decision. This is especially the case, if the person is incapacitated and your POA is valid.

If there is any doubt about whether the POA would be accepted by the bank, now is the time to check and review the language and formatting with your estate planning or elder law attorney to be sure that the form is valid and will be acceptable.

Reference: The Mercury (July 7, 2020) “What to know if your bank refuses your power of attorney”

 

Elder Abuse Continues as a Billion-dollar Problem

Aging baby boomers are a giant target for scammers. A report issued last year from a federal agency, the Consumer Financial Protection Bureau highlighted the growth in banks and brokerage firms that reported suspicious activity in elderly clients’ accounts. The monthly filing of suspicious activity reports tied to elder financial exploitation increased four times from 2013 through 2017, according to a recent article from the Rome-News Tribune titled “Financial abuse steals billions from seniors each year.”

When the victim knew the other person, a family member or an acquaintance, the average loss was around $50,000. When the victim did not have a personal relationship with their scammer, the average loss was around $17,000.

What can you do to protect yourself, now and in the future, from becoming a victim? There are many ways to build a defense that will make it less likely that you or a loved one will become a victim of these scams.

First, don’t put off taking steps to protect yourself, while you are relatively young. Putting safeguards into place now can make you less vulnerable in the future. If you are diagnosed with Alzheimer’s or another form of dementia five or ten years from now, it may be too late.

Create a durable power of attorney as part of your estate plan. This is a trusted person you name as your legal representative or agent, who can manage your financial affairs if need be. While it is true that family members are often the ones who commit financial elder abuse, you’ll need to put your trust in someone. Usually this is an adult child or a relative. Make sure that the POA suits your needs and is properly notarized and witnessed. Don’t count on standard templates covering your unique needs.

Consider the guaranteed income approach to retirement planning. Figuring out how to generate a steady stream of income as you face the cognitive declines that occur in later years might be a challenge. Planning for this in advance will be better.

Social Security is one of the most valuable sources of guaranteed income. If you will receive a pension, try not to do a lump sum payout with the intent to invest the money on your own. That lump sum makes you a rich target for scammers.

Consider rolling over 401(k) accounts into Roth accounts, or simply into one account. If you have one or more workplace retirement plans, consolidating them will make it easier for you or your representative to manage investments and required minimum distributions.

Make sure that you have an estate plan in place, or that your estate plan is current. Over time, families grow and change, financial situations change and the intentions you had ten, twenty or even thirty years ago, may not be the same as they are today. An experienced estate planning attorney can ensure that your wishes today are followed, through the use of a will, trust and other estate planning strategies.

Resource: Rome News-Tribune (April 27, 2020) “Financial abuse steals billions from seniors each year.”

 

Preparing for an Emergency Includes Power of Attorney

Unexpected events can happen at any time. Without a backup plan, finances are vulnerable. The importance of having an estate plan and organized legal and financial documents on a scale of one to ten is fifteen, advises the article “Are you prepared to hand over your finances to someone in an emergency?” from USA Today. Maybe it doesn’t matter so much if your phone bill is a month late but miss a life insurance premium payment and your policy may lapse. If you’re over 70, chances are slim to none that you’ll be able to purchase a new one.

When estate plans and finances are organized to the point that you can easily hand them over to a trusted spouse, adult child or other responsible person, you gain the peace of mind of knowing you and your family are prepared for anything. Someone can take care of you and your family, in case the unexpected happens.

A financial power of attorney (POA) gives another person the legal authority to take financial actions on your behalf. The person you give this responsibility to, should be someone you trust and who will put your best interests ahead of their own. An estate planning attorney will be able to create a power of attorney that can be very specific about the powers that are granted.

You may want your POA to be able to pay bills, and manage your investment accounts, for instance, but you may not want them to make changes to trusts. A personalized power of attorney document can give you that level of control.

Consider your routine for taking care of household finances. Most of us do these tasks on autopilot. We don’t think about how it would be if someone else had to take over, but we should. Take a pad of paper and make notes about every task you complete in a given month: what bills do you pay monthly, which are paid quarterly and what comes due only once or twice a year? By making a detailed record of the tasks, you’ll save your spouse or family member a great deal of time and angst.

Is your paperwork organized so that someone else will be able to find things? Most people create their own systems, but they are not always understandable to anyone else. Create a folder or a file that holds all of your important documents, like insurance policies and investment accounts, legal documents and deeds.

If you pay bills online, naming someone else on the account so they have access is ideal. If not, then try consolidating the bills you can. Many banks allow users to set up bill payment through one account.

Keep legal documents and records up to date. If you haven’t reviewed your estate planning documents in more than three years, now is the time to speak with your estate planning attorney to ensure that your estate plan still reflects your wishes. Call your estate planning attorney to discuss your next steps.

Reference: USA Today (March 20, 2020) “Are you prepared to hand over your finances to someone in an emergency?”