If you have ever had Power of Attorney for a parent or another loved one, you are probably familiar with the frustration that comes with the job. Banks, financial institutions, and even utility companies seem to either have a lot of red tape around the use of a Durable Power of Attorney or reject it outright. Below are some strategies you can use to help with these situations.
In this discussion I will refer to the parent or person who has executed a Durable Power of Attorney as the “Principal” and the child or person who has been given authority under the Durable Power of Attorney the “Agent.” I will also use the abbreviation of “DPOA.”
First, take a breath. Try to remember that these hurdles are in place to protect seniors and others from unscrupulous individuals. The bank or other financial institution has no idea if you are honest or not and they are just trying to protect their clients and themselves. If the DPOA has to be sent to the legal department for review, just be patient. More importantly, do not wait until the last minute to provide a copy of the DPOA because the process often takes two weeks or more to process the document and for the requested action to be taken.
Second, get the Principal on the phone. If the Principal is still competent, call the company or institution with the Principal present so they can give authorization for you to communicate on their behalf. They may even have their own form to be signed by the Principal to allow for future communications. Also, consider taking them into the bank with you to close an account. Seniors will sometimes become confused by a lot of red tape, or perhaps they cannot hear well on the phone, and they ask their Agent for help. If this is the case, don’t fight to have the DPOA honored, just get the Principal involved. Company representatives will often ask the Principal a few security questions to verify their identity and mental capacity and then they can give the company permission to speak with you to get the instructions and information needed to complete the task.
Third, be smart. There are many valid reasons why an Agent may need to close the Principal’s bank account. However, if you instruct the bank to close the Principal’s account and write a bank check to you, you will raise a lot of unnecessary red flags. Instead, you should have the check made out to the Principal. Remember, when working as an Agent under a DPOA, the money still belongs to the Principal. Likewise, don’t go online and close the account and transfer it to your own bank account at the same bank as banks routinely monitor online activity.
Fourth, provide the requested information. Try not to be upset if you are asked for additional information and provide it as promptly as possible. Again, the bank is just protecting their client. Banks are worried about the following situations: 1) the Principal is no longer alive; 2) the DPOA has been revoked; or 3) the Agent is trying to exercise a power that is not granted by the DPOA.
You may be asked to provide an affidavit indemnifying the bank which states that the Principal is alive, and that the DPOA has not been revoked. Some banks will ask for a doctor’s letter stating that the Principal is incompetent. (See above, if the Principal is competent you may need to bring him/her into the bank or get him/her on the phone). If the Principal is incompetent, this letter confirms with the bank that the Principal is alive, and there is a good reason why he/she is not coming personally into the bank. The doctor’s letter may need to explain that the Principal is competent, but cannot speak on the phone, or is too disabled to leave the house. I have been asked to provide a certification for my clients that the DPOA was properly executed and is still in full force and effect.
The worst situation is if the DPOA is completely rejected. In that case, the first step is to find out the exact problem with the DPOA. It’s possible the bank representative does not know exactly why the legal department has rejected the DPOA. It’s important that you find out the exact reason even if you have to call the legal department yourself. If the reason is one of those discussed above, you may be able to provide additional information which will allow the bank to honor the DPOA.
Below are some common reasons why financial institutions will reject a DPOA and some strategies you can take:
If the bank says the DPOA is “too old,” what they mean is that they are concerned that there is a more recent DPOA. Point out that the statute specifically states that a DPOA cannot become invalid due to lapse of time. (Massachusetts General Laws, Chapter 190B, Section 5-502). Along the same lines, the statute protects a financial institution from relying on an old DPOA unless they have actual knowledge that the DPOA has been revoked. You may need to offer to provide indemnification or other documentation to the bank, or you may need to have the Principal’s attorney call.
If the issue is that you are trying to exercise a power that is not in the DPOA, you have a more challenging problem. For example, if the DPOA does not permit the Agent to change the beneficiary of a life insurance policy, then you will not be able to make that change, no matter how good the reason. Unfortunately, if the DPOA does not specifically grant such power, or is silent on the issue, the bank will treat the power as if it is prohibited. If the document is silent on the issue, you may have luck arguing (or having an attorney argue) that the “general grant of power” in the document includes the power you are seeking to exercise. I have not had much luck with that argument. My advice is to be sure you have an attorney draft the DPOA so that it includes a broad array of powers. Massachusetts does not have a standard form and using an online form may save money in the short term but cost a lot more in the long term due to its limitations or lack of specificity.
If the issue is that the DPOA was not properly executed, you may just be out of luck. I recently had a client come in with an online DPOA form which was notarized by the same person named as one of the Agents in the DPOA. In a case like that, if the named Agent also served as a witness then that person may not serve as the Agent. If the DPOA names a backup, however, the backup Agent may be permitted to serve. If the principal is still competent, you can have him/her sign a new document. If there are any other irregularities with respect to the signatures or notary, you will have difficulty convincing financial institutions to accept the document. Again, use an attorney to prepare the document to avoid all these issues.
Selling real estate with a DPOA is the most difficult situation. Some buyers (and their attorneys) will simply refuse to accept a deed signed by a DPOA. Others will insist on special affidavits and indemnifications by the Agent. Most buyers will look for a specific power to sell real estate in the DPOA, sometimes even insisting that the address of the property must be listed in the document. I tell my clients that if the Principal is mentally competent, he or she should plan on signing the deed personally. If the principal is not competent, you may need to take court action, discussed below.
As a last resort, utilize the Principal’s attorney. Hopefully the attorney is the same person who drafted the DPOA. Your attorney can speak directly to the bank’s/financial institution’s attorney and they may be able to reach an agreement, which will probably involve additional documentation and written indemnifications for the bank.
If all else fails, the courts are available. If the situation cannot be resolved in any other way, there is a procedure available in the probate court to authorize a person to take a single action on behalf of an incompetent person. Basically it is a “one time use” conservatorship. Typically I see these one time conservatorships for the transfer of real estate, but they are available for any financial transaction. Given the time and expense involved, however, it is best to try and resolve the situation some other way.