The objectives of agents acting under a power of attorney can be frustrated when banks, brokerages, or title companies refuse to accept the authority granted to the agent under a duly executed power of attorney.
This can happen even though the power of attorney appears to be valid.
Let us first discuss when and why this occurs and how it might be avoided.
Banks, and other financial institutions like brokerages, may refuse to accept a power of attorney if the document (1) contains unfamiliar language (e.g., an attorney’s own document); (2) was signed outside a reasonable period of time (e.g., more than five (5) years ago); or (3) was not done using the bank’s own power of attorney form.
Why? Banks are uncomfortable with their branch deciding whether the power of attorney is valid and whether the agent is acting within his or her legal authority. This is often occurs when the agent seeks access to the contents of a bank safety deposit box.
Such foreseeable problems with banks are less likely to occur with the following types of powers of attorney: (1) a California Uniform Statutory Power of Attorney; (2) a California Statutory Special Durable Power of Attorney For Bank Accounts and Certificates of Deposit; or (3) a bank’s own power of attorney form.
These are all standardized forms that are routinely seen and understood by the banks and other financial companies.
Moreover California’s statutory forms carry extra legal authority, protections and teeth behind them. With a Uniform Statutory Power of Attorney an agent may also present an affidavit to the effect that it is still valid in order to induce reliance by the bank and others and if it is still refused then the agent may sue for enforcement and recover costs if such refusal was unreasonable.
Next, title companies may similarly refuse to accept powers of attorney offered to transfer title to real property when such powers (1) do not refer to the real property and incorporate its legal description; (2) were signed outside a reasonable period of time (such as five years); (3) were not done using a special power of attorney form narrowly tailored to the specific transfer of real property at hand; or (4) were not recorded with the county within a reasonable period after execution.
Such problems with title companies are less likely to occur when the following are true: (1) the power of attorney expressly refers to the specific real property (with legal description included); (2) a special power of attorney is used for the particular transfer of the real property involved; and (3) the power of attorney has been recorded with the county where the real property lies.
How can a person safeguard against their agent being unable to manage their assets and finances during periods of incapacity?
Transfer the assets into the principal’s living trust. Then when the settlor (principal) becomes incapacitated the nominated successor trustee who steps in as trustee becomes the legal owner for purposes of management and control of trust assets.
The banks, brokerages and title companies will still ask to see the trustee’s powers and authority. This means providing a certified copy of the relevant portions of trust or completing the institution’s certification of trust form. If all else fails, it means providing a complete copy of the trust.
However, provided the trustee is acting within the scope of his or her trustee powers and authority the bank will not want some other type of trust document than the trust presented.
Trusts are not written using uniform statutory forms or bank forms so banks cannot require them.
Dennis A. Fordham, attorney (LL.M. tax studies), is a State Bar Certified Specialist in Estate Planning, Probate and Trust Law. His office is at 55 First St., Lakeport, California. Dennis can be reached by e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it. or by phone at 707-263-3235. Visit his Web site at www.dennisfordhamlaw.com .