You've likely heard that a good estate plan includes a power of attorney (POA) for finances—a document that authorizes someone (called your agent or attorney-in-fact) to handle your financial matters if you ever become incapacitated. But sometimes creating a POA isn't quite enough. Though the nearly universal recommendation to create a POA as part of your estate plan may make the document seem airtight, in practice your agent might run into some resistance when presenting a perfectly valid POA to a bank or other financial institution. Here's what you can do about it.
Assuming you created a power of attorney that's valid in your state, can a financial institution still refuse to accept it? Some state laws do allow financial institutions to require additional documentation, such as an affidavit (sworn statement) by your agent. But generally, banks must, by law, accept a POA that is validly made. A few exceptions do exist. For example, if the bank believes in good faith that your agent doesn't have the authority to perform the act requested, or if the bank is aware of a report that your agent might be exploiting or abusing you, the bank doesn't have to accept the document.
Otherwise, banks can face consequences if they don't accept a valid power of attorney. In some states, they're liable for attorney's costs and other costs incurred in the event that you or your agent pursues legal action.
All that said, the reality sometimes looks quite different. Banks are wary of identity theft, scams, and elder abuse, and this wariness can take the form of roadblocks when your agent tries to use your POA to access your accounts. Banks might also stop short of outright refusing to recognize a POA, but their reluctance can take the form of equally inconvenient tactics—like requiring several rounds of internal reviews, during which your agent's hands are tied.
If a bank won't accept a POA, the first step is to find out why. If the POA was not validly made in the first place—for example, it's not notarized, as required by most states, or witnessed, as required by some states—the simple solution is to make a new POA, if possible.
A financial institution might raise objections such as these:
If the person who made the POA still has the mental capacity to understand what they're doing when they sign a POA, and the consequences of giving authority to someone else, then they can simply make a new POA that resolves any issues raised by the bank. But if the person is now incapacitated, the options at this stage are much more limited.
First, try to make the bank officer pinpoint the exact reason for denying or holding up approval of the POA. Familiarize yourself with your state's power of attorney laws and cite specific sections. For example, some state laws have built-in timelines (such as a bank having to accept a valid POA within a certain number of days), and pointing to relevant laws might be enough to jumpstart or speed up the approval. Escalate the issue to supervisors as needed.
If this back-and-forth doesn't pan out, you can seek out the help of a lawyer, which unfortunately means spending more time and money. Short of taking legal action, there isn't much you can do if you face blatant refusal to accommodate your valid POA. For this reason, if you have the ability and foresight to plan ahead, it's best to circumvent future problems by putting a little extra research in at the time when you or your loved one is making a power of attorney.
Simply being aware that banks can be reluctant or slow to allow your agent to access your account—despite a valid POA—is a good start. To pave as smooth a road as possible for your bank to recognize your agent's authority to act, take these steps:
You can also consider creating a POA on a bank's own power of attorney form, but this process can quickly feel overwhelming if you have assets or accounts at many different institutions. Another option is to combine accounts—for example, rolling over retirement accounts so that you only have one—so that you have fewer forms and procedures to navigate. However you choose to proceed, up-front work with financial institutions can save your agent a great deal of time and grief.