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Many people believe that once they sign a Power of Attorney, it can be used whenever it is needed. Unfortunately, that is not always the case.
A Power of Attorney is one of the most important estate planning documents you can have, but there are situations where a bank, investment company or other institution may refuse to accept or delay acting on it.
Understanding these issues before an emergency occurs can save your family time, money and frustration.
1. Your Power of Attorney Does Not Include the
Required Notice
Pennsylvania law requires every Financial Power of Attorney to include a Notice explaining the significance of the document you are signing.
If your Power of Attorney does not contain the required Notice -- or contains an outdated version that does not comply with current Pennsylvania law -- a financial institution may question whether the document is valid.
Although older documents may still be legally effective depending on when they were signed, an outdated Notice can lead to delays while the institution's legal department reviews the document.
2. The Acknowledgment Page Is Missing or Does Not
Comply with Current Law
Pennsylvania also requires an Acknowledgment signed by the person accepting the role of Agent.
This acknowledgment confirms that the Agent has read the attached Power of Attorney, is the person identified as the Agent, and acknowledges that they shall act in accordance with your reasonable expectations to the extent actually known, and otherwise in your best interest, in good faith and only within the scope of authority granted by you.
If the acknowledgment page is missing or does not satisfy current Pennsylvania law, the institution receiving the document may refuse to honor it until the issue is resolved.
3. Your Power of Attorney Does Not Give Your Agent the Authority Needed
Not every Power of Attorney grants every possible power to the agent you have selected. The types of powers you outline in your POA may change depending upon your age, your viewpoints and the agent you choose.
For Powers of Attorney signed on or after Jan. 1, 2015, Pennsylvania law requires certain significant powers, often called "hot powers," to be specifically stated in the document. These powers cannot simply be implied.
Examples include the authority to:
-- Make unlimited gifts.
-- Create or change beneficiary designations.
-- Create or amend certain trusts.
-- Change rights of survivorship.
-- Delegate authority to another person.
-- Disclaim inheritances or other property interests.
If the authority your Agent needs is not specifically included, the financial institution may properly refuse the requested transaction -- even if your Agent is acting in your best interests.
This is one reason it is important to periodically review older estate planning documents.
4. Your Power of Attorney Is Older and the Institution Wants Additional Proof
If your Power of Attorney was signed years ago, a bank or financial institution may consider it to be "stale" and ask for additional assurances before accepting it.
For example, they may request confirmation that:
-- You are still living.
-- You have not revoked the Power of Attorney.
-- The Agent's authority has not ended.
That confirmation may be in the form of a separate affidavit signed by an agent attesting that the document is still valid or a letter from your attorney to verify that the document remains in effect. These requests are often permitted under Pennsylvania law and are intended to protect both the customer and the institution from fraud or misuse. While this can be frustrating, it is a common reason for delays. Consider whether it is time to update your power of attorney.
5. The Financial Institution Cannot Find the Document
Sometimes the problem has nothing to do with the law.
A Power of Attorney may have been previously provided to a financial institution but later misplaced, scanned incorrectly or filed under the wrong account. Your Agent may be told that the institution has no record of the document, requiring a new copy to be submitted and reviewed. For this reason, it is wise to keep copies of your Power of Attorney and let your Agent know where the original is stored.
6. The Institution Suspects Financial Exploitation
Financial institutions have become much more proactive in protecting older adults from financial abuse. If a bank believes that you may be the victim of fraud, undue influence or a "designing person" attempting to improperly obtain your assets, it may temporarily refuse to complete a transaction while it investigates.
Although this can be inconvenient, these safeguards often protect vulnerable individuals from scams and financial exploitation.
If your Agent is acting appropriately, providing additional information usually resolves the concern.
7. The Power of Attorney is "Springing"
Financial powers of attorney can be either immediate or springing. An "immediate" power of attorney takes effect as soon as it is signed, while a "springing" power of attorney only takes effect when the principal becomes incapacitated. If proof that you are incapacitated is not attached, e.g., a letter from your physician, the financial institution will not honor your document. If you regain your capacity, you must attach a second letter from your physician stating that you have capacity and the agent no longer has power. Those who use an online power of attorney form instead of having an attorney discuss the pros and cons of immediate or springing, experience problems.
8. A Power of Attorney Ends at Death
One of the most common misconceptions is that a Power of Attorney can still be used after someone dies. It cannot. The authority of an Agent ends immediately upon the death of the principal.
After death, only the Personal Representative (Executor) named in the Will -- or an Administrator appointed by the court if there is no Will -- has authority to manage the estate.
If bills need to be paid or assets transferred after death, the Power of Attorney is no longer valid.
The Bottom Line
A Financial Power of Attorney is one of the most valuable legal tools available, but it only works if it complies with Pennsylvania law and grants the authority your Agent needs.
Estate planning laws change. Financial institutions update their procedures. Life circumstances evolve. If your Power of Attorney has not been reviewed in several years, now is a good time to make sure it will work when your family needs it most.
Having your estate planning documents reviewed periodically can help ensure they reflect current Pennsylvania law, accurately express your wishes and provide your Agent with the authority needed to act when the time comes. A review today may prevent significant delays, expense and frustration for your loved ones tomorrow.
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Tammy A. Weber is a Certified Elder Law Attorney and the Managing Attorney of the law firm of Marshall, Parker & Weber, LLC with offices in Williamsport, Jersey Shore and Plains. For more information visit www.paelderlaw.com or call 1-800-401-4552.