Even the basics can get complicated

Posted by on May 14, 2013

If you’ve been in my office, you’ve heard me say that the basic elements of a typical estate plan are:  a trust to prevent probate and hold property for beneficiaries until they reach a certain age; a back-up will;  a power of attorney for finances; and an advance health care directive.  Simple—until it’s not.

Alejandro and Alicia are old clients of mine and they were in the process of buying a house for one of their daughters and her family when their son and his wife—living outside the country—were about to have a first baby.  Alejandro and Alicia were concerned that the house buying deal might not go through if they were out of the country and needed to sign some paperwork.  So they updated their Durable Power of Attorney for Finances, naming the local daughter as their Agent, so that she could sign in their stead.  Fortunately they also signed a Limited Power of Attorney, just for the real estate transaction, with their realtor before they left on their trip.

While they were away, transactions were needed with two of their banks.  Local Daughter took their Power of Attorney to the banks,  Bank of America and Citibank, and were told that the banks would honor the document but only after their legal departments had time to inspect the document.  Time was of the essence, and that would have held up matters having to do with financing for the house purchase.  Fortunately, the limited Power of Attorney was accepted and the house purchase went through.

Banks are legally obligated to honor a valid Power of Attorney document.  In fact, if damages are caused by a bank’s delay in honoring the document, the bank can be held liable.  Despite this potential liability, many banks will hold up the process of an Agent acting on behalf of a Principal while the bank’s legal department reviews the document.  In this era of rampant financial fraud and identity theft, one can understand the point of view of the banks.  They don’t want to honor requests for withdrawals made, for example, by adult children who might be trying to steal from their aging parents.  A bank may be willing to risk being sued for damages in order to ensure the validity of a Power of Attorney document presented to them by a non-customer.

That’s why it’s always a good idea to have a Power of Attorney form on file with one’s local bank, naming an Agent (and an alternate) for specific accounts.  Some of the larger banks insist on having their customers use the bank’s own form for a Power of Attorney, even if the customer has a more elaborate, attorney-drafted document.

Especially if you’re going to be out of the country and you’re in the midst of a major financial or property transaction, make sure to have a Power of Attorney form in place at your local bank(s).  And, make sure that the attorney-drafted document you have includes all the variations of your name, with middle names and middle initials, to match the name(s) you use on financial accounts and real property deeds.   Make sure that your Agent has access to an original of the Power of Attorney in case it needs to be recorded with a county recorder.