Using Your Power of Attorney

One of the most frustrating experiences for the clients of elder law attorneys can come when a properly prepared and completely valid power of attorney is rejected by a bank, brokerage house, insurance company or other financial institution. Clients (and, more to the point, their spouses, children or other agents named in their powers of attorney) frequently call to report that "mom's bank says I can't use the power of attorney because it's not on their form."

This common problem is the topic of this week's Elder Law Issues article at the elder-law.com website. This (blog) setting allows us to collect stories from readers who have had similar problems, and it allows us to invite -- and share -- solutions from other contributing lawyers (and agents who have successfully dealt with the problem).

Under the law in most states, a financial institution can not be compelled to honor a power of attorney. In some states, however, there is authority for an action against an uncooperative bank -- though the damages may be limited to a court order requiring the bank to accept the document. Of course, one of the primary reasons clients sign powers of attorney in the first place is to avoid the cost and hassle of court proceedings, and when court involvement is required to enforce the power of attorney -- well, the whole point of simplicity and ease of administration can sometimes be lost.

Who are the culprits? Over the years it has been our experience that most brokerage houses have become comfortable with powers of attorney -- at least those drafted by a lawyer. Sometimes the lawyer may be asked to sign an affidavit that the document was properly signed, and that the lawyer is unaware of any revocation of the power of attorney; most attorneys are happy to sign such an affidavit on request (assuming, of course, that those assertions are correct).

Insurance companies may be somewhat less likely to accept a power of attorney, though that may be appropriate. Changing beneficiaries on an insurance policy may be outside the scope of the agent under most powers of attorney. The other kinds of things an agent may be trying to accomplish with an insurance company might include: (a) cashing in an annuity, or an IRA or tax-qualified retirement plan, or (b) converting an existing life insurance policy to paid-up status, or transferring ownership to the owner's living trust, or making other administrative changes to a policy. In most cases, insurance companies eventually bring themselves around to an appropriately cooperative position.

Other financial institutions may present special problems. Title insurance companies often resist transfer of real estate interests using a power of attorney, though this problem seems less common in recent years. If you want to use a power of attorney to transfer U.S. Government securities -- well, good luck.

That leaves banks. Oddly, the most recalcitrant banks seem to be the largest ones. You might assume that a larger bank would have access to good -- and responsive -- internal legal advice, and resources that let the teller figure out what local law and practice require. You'd be wrong. The very worst banks to deal with (in our experience, anyway)? Well, think stagecoaches. And San Francisco. And Italian heritage. That's two banks, if you're having a hard time counting.

Why do banks resist accepting powers of attorney? The answer is speculative, and tinged with cynicism. As the banking industry has become less personalized and more, well, impersonal, it seems to have come to rely on untrained, short-term and high-turnover staff. Rather than try to train, retain or support front line bank employees, the big organizations seem bent on reducing every policy to the simplest and most enforceable answer. That means the "answer" is usually: "no!"

Bank legal departments used to be a good resource for customers and their lawyers. No more. National banks do not like to acknowledge the existence of a legal department, and it is virtually impossible to ever get to talk to even a receptionist in the in-house legal offices they do maintain. When, by begging, flattering, cajoling and threatening, you finally get to talk to the "legal department," it almost always amounts to a trainee legal assistant who seems never to have met a lawyer, either professionally or socially.

So banks tend to insist on the use of their two-paragraph "powers of attorney," sometimes referred to as their "short-form" or "signature card" powers. There is nothing in the law of any state requiring anyone to rely on those documents, of course -- but that doesn't stop the banks. Those are the forms they are most familiar with, and the training curve is very simple if you only accept one, standardized document as a power of attorney.

Related to this phenomenon is the growing practice by some banks (and a handful of other financial institutions) to rely on their own playbooks for other legal proceedings. Death in the family? Produce "letters testamentary" (forget that your state may not use that language -- that's what the playbook written in North Carolina, or Missouri, or wherever, says to ask for). Does your state have a "small estates affidavit" procedure to avoid the necessity of probate proceedings (and, therefore, the issuance of "letters")? Don't expect anyone except at the highest echelons of the bank to have any idea what you're talking about. You have the "letters of personal representative" (that's what we would call them in Arizona)? Oh, good -- but you'd better have a certified copy of the death certificate, too. What, you say? It's impossible to get a probate started on a living person? Of course it is -- but the bank's playbook says you need to prove the death to the bank, too. It's not good enough to satisfy the probate court that the account owner is deceased.

We could go on and on. Perhaps, if there are comments, questions or an invitation to tell horror stories, we will. But the bottom line is this: dealing with banks, and sometimes with other financial institutions, can be difficult and even sometimes nearly impossible. Despite the best efforts of legislators to simplify the probate process, and to provide for non-court alternatives like powers of attorney, the frustrating reality is that in recent years it has gotten harder, rather than easier, to get even simple financial transactions completed when you are dealing with an incapacitated or deceased account holder. We wish it wasn't that way, and that we didn't spend so much of our time dealing with this frustration, but the only way we see to fix the problem is to buy a bank. Sadly, we're a little short of pocket change just now.

Robert B. Fleming
Fleming & Curti, PLC
Tucson, Arizona
www.elder-law.com
www.specialneedsalliance.com

Comments

[Pat Trueblood]

Be aware an institution might say the power of attorney is "too old". They might want something signed within the last couple of years instead of ten years ago.

[Robert Fleming, esq.]

Pat:

You are absolutely correct. This is one of the favorite roadblocks thrown up by banks. Notwithstanding what the bank official might say, there is no automatic aging of powers of attorney (that assumes, of course, that there is no language in the power of attorney itself terminating it after a period of time--and such language is rare). You can try saying: "think about it. If my mother continued to be incapacitated for a ten-year period, how could she ever sign a more current power of attorney?" That may not work, but it's worth a try.

Brokerage houses, particularly, are accustomed to asking for authority that is less than six months old. That comes from the notion that if you are acting as personal representative (executor) of an estate, you should be able to show that the estate was still active within the past six months. The power of attorney, by its nature, is "active" until the death of the principal, so the analogy doesn't work. That doesn't stop the brokerage house (or bank) from insisting that you should have a document that was signed within the past six months. The good news: brokerage houses, unlike banks, tend to have hierarchical structures that allow them to actually talk to an in-house lawyer who can set them straight. Usually.

Robert Fleming
Tucson, Arizona
www.elder-law.com

[D. Jefferson Herring, Attorney]

Several years ago, the ABA Section of Real Property, Probate and Trust published a recommended paragraph for powers of attorney to deal with brokerage accounts. I downloaded that paragraph and have continusously used it, and it has worked well with brokerage houses. For whatever it is worth, I have inserted that paragraph below.

I do not know if the Section still publishes this provision. Supposedly, the ABA folks got together with representatives of the major brokerages houses to arrive at this provision. While I am still a member of the ABA and the Section, I was forced to stop all emails because I was getting scores of nuisance emails daily to attend seminars completely unrelated to my fields of practice.

Jeff Herring
D. Jefferson Herring, Attorney
D. Jefferson Herring, P.C.
144 Second Avenue North, Suite 200
Nashville,TN 37201

With respect to my brokerage accounts, to effect purchases and sales (including short sales), to subscribe for and to trade in stocks, bonds, mutual funds, options, rights, and warrants or other securities, domestic or foreign, whether dollar or non-dollar denominated, or limited partnership interests or investments and trust units, whether or not in negotiable form, issued or unissued, foreign exchange, commodities, and contracts relating to same (including commodity futures) on margin or otherwise for my account and risk; to deliver to my broker securities for my account and to instruct my broker to deliver securities from my accounts to my attorney-in-fact or to others, and in such name and form, including his own, as he or she may direct; to instruct my broker to make payment of moneys from my accounts with my broker, and to receive and direct payment therefrom payable to him or her or others; to sell, assign, endorse and transfer any stocks, bonds, mutual funds, options, rights and warrants or other securities of any nature, at any time standing in my name and to execute any documents necessary to effectuate the foregoing; to receive statements of transactions made for my account(s); to approve and confirm the same, to receive any and all notices, calls for margin, or other demands with reference to my accounts(s); and to make any and all agreements with my broker with reference thereto for me and in my behalf. My attorney-in-fact may vote in person, or by general or limited proxy, with or without power of substitution, with respect to any stock or other securities I may own. I authorize my attorney-in-fact to execute on my behalf any powers of attorney in whatever form which may be required by any stockbroker with whom I have deposited any securities.