While you might expect that your power of attorney will be honored by anyone to whom you present this legal document, that is not always the case. In fact, it is quite common for third parties to be hesitant to honor a power of attorney. This includes banks and some insurance companies. Often, financial institutions require some type of confirmation that the document is legally valid. So, when a bank will not honor a power of attorney, there are ways to deal with this situation. First, you should understand the laws regarding powers of attorney.
The Uniform Power of Attorney Act
Uniformity of laws is a very important and useful concept. In the context of estate planning and the use of a power of attorney, uniformity is equally significant. Yet, most states have their own laws governing powers of attorney. These laws do not always address the need for businesses and financial institutions to honor these important legal documents.
Businesses may either refuse to honor a power of attorney, or they may impose additional requirements before the document will be complied with. For these reasons, in 2006, the National Conference of Commissioners on Uniform State Laws approved an important statute known as the Uniform Power of Attorney Act. Nearly every state has adopted the Act.
What does the Uniform Power of Attorney Act require?
One of the main provisions of the Act, titled “Liability for Refusal to Accept Acknowledged Power of Attorney,” requires third-parties to either accept an acknowledged power of attorney or request a certification, translation, or an opinion of counsel within seven business days of being presented with the document.
Once a request for certification, translation, or a legal opinion has been made, the third-party must honor the power of attorney within five business days of receiving the requested evidence. Furthermore, contrary to the previous practice of many banks, a third-party can no longer require a different form of power of attorney. In other words, banks used to require individuals to provide the power of attorney in a specific format that the bank created, before the power of attorney would be honored.
Why do banks refuse to honor a power of attorney?
Historically, a power of attorney was widely accepted, and rarely challenged by businesses. That was before the prevalence of abuse of power had reached such an all-time high. Situations involving adult children misusing their authority, as power of attorney, to steal from their parents became too frequent.
The result was the increase in banks and other institutions refusing to honor a power of attorney, on its face. Instead, they felt compelled to take their own precautions against abuse, which led to more stringent requirements for the use of a power of attorney. In some cases, banks would reject a power of attorney that was more than 6 months old, or executed in a different state.
How the Uniform Power of Attorney Act helps
The higher standards being required by banks made it extremely difficult, in some cases, for honest individuals to provide necessary care and assistance to their parents. Often, the additional requirements imposed by some banks were so burdensome that they became nearly impossible to accomplish.
By requiring banks and other institutions to accept a valid power of attorney, as is, and allowing a reasonable process for determining the validity of the document, the Uniform Power of Attorney Act has alleviated many of the issues caused by agent abuse.
If you have questions regarding a power of attorney, or any other estate planning needs, please contact Sexton, Bailey Attorneys, PA online or by calling us at (479) 443-0062.