What to do if a Bank Refuses to Honor Your Power of Attorney
2 years ago I wrote about bank and other financial institutions’ resistance to powers of attorney (POAs). Since then we have seen an increase in frequency of these issues so it bears revisiting some of the common problems and solutions.
When we draft POAs for clients we tell them to expect some resistance. Many financial institutions act out of an abundance of caution. They are concerned about fraud and their own liability, however they often go too far. Bank policies are often too restrictive, lack common sense or just plainly violate state laws. We tell clients to expect push back but if you find yourself in that situation (ie. looking for bank approval of a POA) what should you or can you do?
The more official looking the POA the less resistance to honoring it you are likely to get. For one thing, I don’t recommend “do it yourself” or “internet” POAs. Often they are done incorrectly. I have seen some in which the principal (the person designating someone to act for him/her) lists him/herself as the agent rendering the document meaningless. Unfamiliarity with legal documents can lead to mistakes that invalidate the documents, such as when they are “fill in the blanks” type of documents.
These self prepared documents also tend to be too vague. Financial institutions – more specifically their legal departments – will scrutinize these documents. If the language in the document does not cover the specific task the agent is looking to carry out, the financial institution will likely refuse to honor it.
The POA should be as official looking as possible. Every effort should be made to have it notarized with a notary stamp and/or seal before two witnesses. It can be done without witnesses but if there is a question about validity there are 3 potential people who can support its validity.
Financial institutions typically ask to see the original. To easily distinguish the original from a copy we have at least one person (the principal, notary or witnesses) sign in blue ink. As far as the execution is concerned, the overwhelming majority of documents we prepare are executed in our office or in our presence as witnesses and/or notary This allows us to directly advocate for our clients when they find resistance. We are able to step in to answer any concerns a third party may have about the validity or scope of the document and the powers contained in it. We also know when a financial institution has overreached in terms of what is permitted under the law.