Q. My cousin’s parents executed a Power of Attorney naming her and her sister as co-agents. My aunt is now deceased. My uncle, who has dementia, is owner of an investment portfolio with monthly dividends being automatically reinvested. My cousins wish to have the dividends placed into my uncle’s checking account so that they may use the funds for monthly fees at a memory-care center. Wells Fargo recently told them that they will not honor the Power of Attorney because it is a ‘joint’ Power of Attorney. Apparently the bank would honor the Power of Attorney if the document specified that my cousin or her sister were able to act alone. My uncle can no longer sign his name in order to modify the existing Power of Attorney. Can the bank do that, and how can I avoid it happening to me, should I find myself in a similar situation?
A. A properly-drafted Financial Power of Attorney is the most important legal documents that a person can have, and is an essential part of every Incapacity Plan and Estate Plan. It authorizes an agent, sometimes called “Attorney-in-Fact,” to act on your behalf and sign your name to financial and/or legal documents.
Several states, including Virginia and Maryland, have passed statutes requiring that banks accept a Power of Attorney under certain circumstances. In Virginia, a bank must accept a notarized Power of Attorney unless a statutory exception applies. Unfortunately, one very broad statutory exception is that a bank is not required to accept a Power of Attorney if it believes in good faith that the agent does not have the authority specified in the document or that the agent has been relieved of his authority.
To protect themselves from liability, banks, especially large banks such as Wells Fargo, have been known to reject powers of attorney, for fear of being parties to fraud. For instance, some banks, including Wells Fargo, have started rejecting documents that were signed more than twelve months ago, that are from out of state, or for other reasons, making it much tougher for well-meaning adult children to take the reins when their parents’ health falters.
So, even with the best power-of-attorney documents, it’s sometimes still hard to get some banks to honor them because of liability concerns. However, there are ways to draft these legal documents to improve the chances that banks will honor them—and that loved ones won’t misuse them. But it takes careful planning with an experienced Elder Law Attorney such as myself. So what can you do to make sure your Power of Attorney doesn’t spark tussles with banks?
- Set it up early: It is prudent to set up a Power of Attorney while you are still healthy and in full control of your faculties. You need to be comfortable with the person to whom you’re giving Power of Attorney, since it generally can be invoked at any time. You need to decide whether to make the powers you authorize narrow or broad, make sure you trust the person you’re granting them to, and understand when these powers take effect.
- Set it up with the Right Attorney: Every power of attorney document is different, and most power of attorney documents are not worth the paper they are written on. There is no standard “form” that you can download from the Internet or obtain from some online legal services provider that is going to be suitable for your specific needs. I review an average of ten power of attorney documents every week that have been done by people on their own, or prepared by attorneys who are not experts in Elder Law. Invariably, I must prepare a new power of attorney because the ones presented to me are almost always severely lacking important / essential provisions. It is much simpler and less expensive to get it done properly the first time then to have to pay twice to have a bad document redone and then have the hassle of going back to various financial institutions and your agents in order to replace your old power of attorney with your new one.
- Get a Capacity Evaluation: If you are over 62 and if you think that the day might possibly come in the future where you might need a reverse mortgage, then shortly after signing your power of attorney, you should have a competency evaluation done by your doctor to confirm that you were competent to sign the power of attorney. This document, which we provide to our clients, will be required in the future by any reverse mortgage lender if your agent tries to use your power of attorney to obtain a reverse mortgage for your benefit, such as to pay for in-home healthcare to prevent you from having to move to an assisted living facility or nursing home.
- Keep It Current: The best way to avoid pushback from banks, brokerages, fund companies, and other asset-holders is to renew/update your Power of Attorney every year. Our firm offers a Lifetime Protection Program whereby we will update your POA every year, along with lots of other legal services. For example, if you are a client under our Lifetime Protection Program, we will fight the bank for you if a bank refuses to honor your power of attorney.
- Avoid Co-Agents Who Are Required to Act Jointly: Having co-agents is fine if the two agents get along well and will not work at cross-purposes, but have the POA drafted so that either agent can act separately. This way you will not run into the problem that you have currently found yourself in. Banks do not want to honor a joint power of attorney were both agents must sign because banks do not want to be responsible for policing this “double signature” requirement.
- Set up a Revocable Living Trust: The purpose of a Power of Attorney is to avoid the nightmare of lifetime probate if you also want to avoid the nightmare of after-death probate, you should set up a Revocable Living Trust (RLT), because a Will puts your estate through the nightmare of after-death probate. An RLT also offers protection from incapacity by providing uninterrupted management of your trust assets by your trustee.
Problems with Wells Fargo
As you may have heard in recent news, Wells Fargo is being sued for participating in illegal practices such as requiring customers wanting one product to purchase additional ones. The lawsuit also alleges the bank is allowing bankers to create debit card PIN numbers, often without customer authorization, to enroll a customer in online banking, charging bogus fees, and delaying the opening of new accounts or processing a sale until a time that is most beneficial to the bank.
If you are a Wells Fargo customer, be sure to review your banking accounts and records, and check your credit report. Check to see if there are any unauthorized checking and saving accounts in your name, and if accounts you thought you closed remained opened.
Also, beware if you are a Wells Fargo customer, that I have heard of them not only refusing to accepting valid Powers of Attorney, but also refusing to accept court orders establishing someone as a conservator, and refusing to honor the ability of a successor trustee of a trust to access trust funds. It is important to consider this when you are doing your planning and thinking about the future.
Plan Ahead and Be Prudent
We here at Farr Law Firm, P.C. believe that senior consumers should have access to all of the information and consumer protections they need to make important decisions. As you know, one of the most important decisions you can make it to plan for your future and for your family. If you have not done Incapacity Planning or Estate Planning, or if you have a loved one who is nearing the need for long-term care or already receiving long-term care, the time to plan is now.
In addition, if you have not updated your planning documents in a while, don’t let too much time pass between reviews of your plan. The cost of a review is minimal; but the cost to your family if you neglect your plan could be disastrous. Be sure to ask about The Farr Law Firm’s Lifetime Protection Program, which ensures that your documents are properly reviewed and updated as needed, so that they will have the proper effect under the law.
Please contact Farr Law Firm, P.C. as soon as possible to make an appointment for a consultation:
Fairfax Power of Attorney: 703-691-1888
Fredericksburg Power of Attorney: 540-479-1435
Rockville Power of Attorney: 301-519-8041
DC Power of Attorney: 202-587-2797
About Evan H Farr, CELA, CAP
