Estate Planning Resources
Is Your Power of Attorney Strong Enough?
Estate Planning:
Protecting Your Family & Your Assets
Your Power of Attorney vs Your Bank
If you’ve signed a Power of Attorney naming someone you trust to handle things if you’re ever unable to, you probably felt a sense of relief.
There can be a catch though. It’s unfortunately one that most families don’t discover until they’re on the verge of a crisis.
A perfectly valid Power of Attormey document can actually be rejected by your bank.
It’s a frustrating scenario we hear about far too often. For example, a parent has a stroke. Their adult child – their Power of Attorney agent – goes to the bank to pay the bills and keep their parent’s household running.
Instead of helping, the bank says no, claiming the document is too old or needs legal review.
Thankfully, this is a situation you can avoid.
What is a Power of Attorney?
A Power of Attorney is a legal document that lets someone you trust make decisions for you when you can’t.
If you become incapacitated, that person becomes your legal agent. They can act on your behalf by managing your finances, medical care, or other matters you’ve specified.
Financially, you might give your Power of Attorney agent the ability to access your financial accounts, pay your bills, and make financial decisions they believe are in your best interests.
Do you need a Power of Attorney?
Want to make sure your Power of Attorney is strong enough?
Talk with us about an estate plan that protects you and keeps your family in control.
Why Banks Push Back (and How to Fix It)
Banks aren’t acting in bad faith when they push back. They’re simply terrified of liability and being sued if they let the wrong person access an account.
To help your loved ones avoid this situation and the serious problems it can cause, we recommend taking these specific steps before a crisis ever arises.
Take these steps before your Power of Attorney is ever needed:
- Register the Document Early: Take your Power of Attorney document to your bank now so they can place it on file. This can eliminate future questions.
- Use Proprietary Forms: Many large financial institutions, like Chase, Fidelity, Vanguard, and Schwab, require that you verify your Power of Attorney with them using their own internal forms. Make sure you complete those forms along with the documents your attorney drafts for you.
- Update Regularly: Since an aging document can be an invitation for a bank to say no, update your Power of Attorney document every three to five years.
- Include Explicit Durability: Make sure your Power of Attorney document clearly states it stays in effect if you become incapacitated. In legal terms, you want what’s called durable language. Without this explicit durability, your Power of Attorney actually won’t be valid if you’re incapacitated. That’s of course the opposite of what you need.
- Be Specific: Name the specific acts your agent can perform, like wire transfers and account closures. This makes it much harder for a compliance officer to reject it.
The Safer Solution: A Revocable Living Trust
While those steps help, the best way to sidestep the problem completely is by creating a revocable living trust.
When your assets are placed inside a trust, the trust technically owns the accounts even though you control them. If you become incapacitated, your successor trustee steps in like a Power of Attorney agent would, but there’s virtually no waiting periods or other roadblocks.
Banks understand trusts and have clear, straightforward legal procedures for working with trustees.
A Power of Attorney is still needed for assets outside the trust, but a funded trust is the most reliable tool to prevent your family from being stranded at the bank.
Common Questions About Power of Attorney
Planning for incapacity can feel overwhelming, but finding the right answers is easier than you think. Here are straightforward answers to common questions we hear from families.
Why would a bank reject a valid Power of Attorney?
Banks err on the side of extreme caution to protect themselves from liability. If they suspect a document is too old, revoked, or forged, they will reject it to avoid being sued.
How often should I update my documents?
You should update your documents every three to five years. Banks are much more comfortable with recently executed documents.
Is a Power of Attorney all I need?
No. While it is a necessary document, relying on it alone is not a complete plan. Creating a funded revocable living trust is often a much more reliable way to ensure your family can access accounts during a crisis.
Make sure your Power of Attorney is the one in control when it matters most!
Let Bishota Law create a Life & Legacy Plan for you that can close gaps like these.
Schedule your free, no-strings-attached consultation today so we can talk through the plans that are best for you.
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