We advise our clients to execute durable powers of attorney to make sure that someone can step in and take care of their legal and financial matters in the event of incapacity. Sometimes, individuals use these documents to take advantage of seniors and on very rare occasions, banks are held responsible when that happens. As a result, they are often reluctant to accept durable powers of attorney for their intended purpose. This can cause real problems and costs for families.
Here's what a fellow attorney recently wrote to me:
This is my problem—I recently had two banks (Eastern Bank and Bank of America) require medical proof that the principal (Dad) was unable to manage his finances. This is not a "springing POA"—it is a standard Durable POA with a Third Party Reliance clause.
Eastern Bank also raised the same issue re: the son replacing Dad as Successor Trustee of father's Revocable Trust, even though there was no medical certification required for appointment of Successor Trustee and a Third Party Reliance clause.
Son had to produce medical records re: father's dementia, which is a violation of father's privacy.
She then asked if she should include language in her documents "stating that no medical certification is required for the attorney-in-fact or successor trustee to act." Adding this language may or may not do the trick with the likes of the Bank of America and Eastern Bank, but it should be unnecessary since no medical certification is required under the Uniform Durable Power of Attorney Act.
Problems with Banks
While we haven't run into the medical certification requirement, we have had to help clients when banks and other financial institutions have refused to honor durable powers of attorney because they view them as too old, or they want certification that the client hasn't executed a superseding durable power of attorney. In some cases, we have been successful in arguing our case up the chain of command within the financial institution.
But when we're not successful, we and our clients have had to jump through their hoops, whatever they may be. You can't fight city hall. It's often easier for our clients and us to comply with the financial institution requests, however unlawful, rather than bring them to court or to seek a conservatorship in probate court. On occasion, we've supplied the necessary certification as to no intervening documents even though we had no direct knowledge of what the client may or may not have done during the years since we last met with her.
So, what can you do to avoid financial institution defiance of the law? Here are a few steps you can take in advance:
- Execute a new durable power of attorney every five years. This can help avoid the banks' "staleness" doctrine.
- See if the bank or financial institution has its own power of attorney form. Often, if they do, and if you complete it as well as your general durable power of attorney, they will be more likely to accept it.
- Complete and fund a revocable trust as well as a durable power of attorney. Banks and financial institutions are more accepting of trusts. And, if you name your successor trustee as co-trustee with you, he can step in seamlessly if you ever become incapacitated.
In many cases, these extra steps are unnecessary, as they should be. But you can never know in advance, so we urge our clients to be proactive to avoid the trouble, delay, and expense when they need someone to step in.