Picture this: Your mother, a widowed individual, is starting to experience memory difficulties. You are concerned that she may forget to make crucial bill payments. This seems like the perfect moment to become more involved in her financial matters.
Thankfully, your mother has designated you as her power of attorney. Armed with the power of attorney document, you visit her bank to prove that you possess the legal authority to access her accounts and perform transactions on her behalf, especially now that she may be dealing with dementia. However, the bank hesitates to accept it.
Regrettably, this scenario can happen to anyone providing assistance to aging loved ones or parents. Numerous stories circulate about banks and financial institutions refusing to acknowledge power of attorney documents, leaving caregivers scrambling to find ways to manage daily financial responsibilities without access to their loved ones’ accounts.
To prevent finding yourself in this predicament, it is crucial to understand why financial institutions may reject the power of attorney documents you present, as well as how to increase the likelihood of acceptance.
Why Banks Require Power of Attorney Documents
Financial institutions, such as banks and credit unions, have a serious obligation to protect their customers and their privacy. Thus, they take precautions to ensure that the necessary legal requirements are met before granting access to a customer’s account. Joe Dylla, in-house counsel and vice president of The First National Bank in Sioux Falls, explains that this entails confirming whether someone has been legally named as power of attorney or appointed as a court conservator.
Even if your parents or loved ones have authorized you as their power of attorney through a legal document, you cannot expect the bank to accept your word alone. You must provide the power of attorney document to the financial institution to validate its authenticity.
This verification process protects the bank’s customers from potential financial exploitation, particularly among the elderly. According to Dylla, elder abuse is a significant problem, with individuals taking advantage of seniors and manipulating their finances for personal gain.
Reasons Banks May Reject Power of Attorney
Financial institutions prioritize customer protection, leading to various reasons for rejecting power of attorney documents. Here are the most common explanations:
The Power of Attorney Is Invalid
In most states, banks are legally obliged to accept valid power of attorney documents. To be considered valid, the document must be signed and, in many cases, notarized. Some states may even require witness signatures. If, for instance, your parents downloaded a fill-in-the-blank power of attorney document but failed to follow through with notarization, it may not hold validity.
The Power of Attorney Is Not Durable
If you are attempting to access accounts on behalf of your parents or loved ones due to their diminished mental competence, you can only do so if the power of attorney is durable. A durable power of attorney remains in effect even if the individual who created it (the principal) becomes temporarily or permanently incapacitated. Without a durable power of attorney and with your parents’ loss of competence, you would no longer possess the authority to manage their finances.
Insufficient Documentation for a Springing Power of Attorney
If your parents have a springing power of attorney that only becomes effective under specific circumstances, such as incapacity, you will need documents from their physicians proving their incapacitation. The bank will not simply accept your word that your parents can no longer manage their accounts independently.
The Account Is Owned by a Trust
The First National Bank in Sioux Falls often rejects power of attorney requests when individuals attempt to access trust accounts established by their parents. Merely being the power of attorney does not grant you access to a trust account. As Dylla points out, “The trustee is responsible for that account.” To gain legal access to a trust account, you must be listed as the trustee or added as a co-trustee.
The Power of Attorney Is “Stale”
Certain banks may be reluctant to accept so-called stale power of attorney documents drafted several years ago. They fear that new documents may have been executed since then, and they do not wish to provide access to customers’ accounts to the wrong individuals. Although there are no state laws invalidating older power of attorney documents, banks may reject them based on the document’s age.
How to Ensure Acceptance of a Power of Attorney
In addition to ensuring the validity and appropriate type of power of attorney document, you can take the following steps to facilitate access to your loved ones’ accounts when they require your assistance:
Accompany your parents or aging loved ones to the bank while they are still in good health and mentally competent. This demonstrates to the bank that your parents have entrusted you with their financial affairs in case of an emergency. Dylla emphasizes that having the customer confirm your role provides a sense of reassurance. Additionally, the bank may require your parents to sign its own power of attorney forms and obtain your specimen signature for record-keeping purposes, if necessary.
If your parents are incapacitated, reach out to their bank to inquire about the requirements for accepting a power of attorney. Schedule an appointment to submit the necessary documents for review, including the power of attorney document, your identification, and any medical records indicating your parents’ inability to make financial decisions.
If a bank refuses to accept a validly executed power of attorney, ask for a clear explanation regarding their legal basis for denial. Request written documentation of their reasoning, which you can then present to an attorney. The attorney can draft a letter to the bank to resolve the issue or indicate potential legal action.
Alternatively, if your parents’ bank creates unnecessary obstacles to account access, consider transferring their accounts to a different bank, such as a smaller community bank or credit union. At The First National Bank in Sioux Falls, Dylla has encountered several cases where adult children switched their parents’ accounts due to resistance from other banks unwilling to accept valid power of attorney documents. A suitable bank should support you during times of need, rather than hinder your efforts.
To learn more about navigating joint bank accounts with aging parents, click here: Should I Open a Joint Bank Account With My Aging Parent?