Durable Power of Attorney Becoming Harder to Use?
In this day of identity theft and general misbehavior, some of the recommendations you've been hearing about preparing to help a senior manage his or her financial affairs may soon be at least partially out of date.
"Get a Durable Power of Attorney!" We take this advice to heart, follow it, and rest easy that we'll be able to step in and manage our parent's finances if it should ever be necessary.
Think again. The times they are a'changin', and it's no different in financial long-term planning.
More and more frequently we're hearing that banks and other large financial institutions are refusing to honor a durable power of attorney when it's presented by someone the bank doesn't know. Usually, by the time an attorney-in-fact (the person who has been appointed) comes into the bank, the senior who signed the document is no longer able to manage his or her finances. This is no time to be finding out that the power of attorney document is questionable.
Your attorney may well tell you that a properly executed durable power of attorney must be honored. These days our banks and financial institutions are not so sure or so quick. There's a very good reason for this, although it makes our lives a bit more complicated.
Any power of attorney can be rescinded. If John gives durable power of attorney to his son, Tom, and John later changes his mind, he can rescind the old power and execute a new document giving authority to his daughter, Mary. If Tom still has copies of the old legal documents, what's to stop him from showing them to the doctor and getting a statement of incapacity, which he then takes to the bank and withdraws or misuses John's money? Mary then shows up at the bank and presents her properly executed documents, but the money is gone or misappropriated. The bank is liable, and had no way of knowing that they were making a big mistake.
This is the nightmare that fiduciary institutions are doing their best to avoid by requiring their own documents be executed, even if there is a durable power of attorney in place. Many of these institutions want the signer to come in and sign these documents in front of a manager, just to be sure that there is no question that the signer is doing so willingly.
So, in addition to signing a durable power of attorney document, most seniors now should plan to get in touch with every financial institution they do business with. Ask what documents will be necessary in case of incapacity or even if the senior just wants someone else to take over money management. This means all banks, brokerages, financial planners, and any other entity that may be managing investments or holding deposits. Most of these institutions will at least want the senior to personally bring in a copy of the executed durable power of attorney document to verify that it represents the senior's wishes. Many will want him or her to also sign the institution's own document when they come in.
What this means is that we really cannot wait until our older family member is on the brink of incapacity or seriously ill and unable to get to the bank to get these documents done. Your attorney may be willing to come to the hospital. Unless there is a huge estate involved, bank managers and brokerages will probably not.
If your elder is reluctant to do a durable power of attorney, print this out and let him or her read it. Suggest that he make a call to his bank and his broker or investment manager and ask them how they prefer to handle powers of attorney. Hearing it from the horse's mouth may be what's needed to get things moving.