Many of us assume that once a power of attorney is executed, everyone is required to honor powers of attorney or acknowledge the authority that is given to the agent. However, that is not necessarily true. A power of attorney can be, and often will be, questioned by third parties, like banks and insurance companies. They may demand proof that the legal document is still valid. They can reject it entirely, if it was executed too long ago. So, what can be done?
How abuse of powers of attorney has affected the law
There was a time when a power of attorney was rarely challenged. That is because they were rarely exploited by the agent. Regrettably, the number of cases of adult children using a power of attorney to steal from their parents has increased over the years. This rise in incidents of misuse began prompting lawmakers to focus on the problem of power of attorney abuse.
The abuse of powers of attorney really gained national attention in 2007, when the son of philanthropist, Brooke Astor, was indicted for attempting to “unjustly enrich” himself through her power of attorney. He was ultimately convicted in 2009 for grand larceny, after stealing more than $1 million from his mother.
Abuse leads to refusal to honor powers of attorney
Banks and other financial companies began taking their own precautions against abuse of powers of attorney, by imposing tougher requirements for honoring these instruments. As a result, banks routinely refuse to honor powers of attorney if they were signed more than 6 months prior, as well as powers of attorney from other states. These higher standards make it more difficult for well-meaning adult children to care for their parents’ affairs when necessary. In some cases, the requirements imposed by these entities can be extremely burdensome, and almost impossible to meet. But how do you strike a balance?
The Uniform Power of Attorney Act
Nearly every state has enacted its own laws concerning powers of attorney. However, not every state requires businesses to honor a power of attorney. Lawmakers and regulators began expressing their concerns with the inconsistency of state laws. As a result, the National Conference of Commissioners on Uniform State Laws approved the Uniform Power of Attorney Act in 2006. Only nine states have adopted this uniform law, including Arkansas. The Uniform Power of Attorney Act was enacted for the purpose of bringing uniformity to powers of attorney, which have rapidly become very common tools in estate planning. Arkansas adopted the Uniform Power of Attorney Act in 2011.
One of the provisions of the act addresses “Liability for Refusal to Accept Acknowledged Power of Attorney.” Under this provision, a third party must either accept an acknowledged power of attorney or request a certification, translation, or an opinion of counsel within seven business days of presentment. Once requested, the third party must accept the power of attorney within five business days of receiving the requested document. Also significant is the provision that a third party cannot require an additional or different form of power of attorney, which banks had begun to do routinely.
If you have questions regarding a power of attorney, or any other estate planning needs, please contact Wilcox Attorneys, PA online, or by calling us at (479) 443-0062.
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