Not-So-Powerful Powers of Attorney

power of attorneyEverybody should have a power of attorney—that is, a legal document that gives a designated individual the right to act on their behalf when making financial decisions. The power of attorney is most often used by adult children to make decisions on behalf of aging parents when they are no longer capable of making sound decisions on their own.

The most common decisions that the adult children will make relate to money, and this is beginning to cause problems in some states.  Banks are starting to see cases where the power of attorney is abused by adult children seeking to enrich themselves at their parents’ expense—a form of elder abuse that Alzheimer’s suffers are particularly vulnerable to.  Wary of being held liable for customers’ losses, some financial institutions have stopped accepting power of attorney documents.  In some cases, adult children with the best intentions have had to take legal action to enforce a document executed and followed in good faith.

How can you prevent these misunderstandings in the first place?  A standard durable power of attorney gives the son or daughter the authority to act on the parent’s behalf immediately after the document is signed.  A “springing” power of attorney, on the other hand, doesn’t generally give the child that authority until the parent becomes incapacitated.  Most power of attorney documents are of the “springing” variety, which can create extra complications for adult children: they have to obtain a statement from a physician certifying that the parent is incapacitated.  Recent medical-privacy laws can make it difficult for the physician to communicate this information without authorization, leading to a legal Catch 22.  The durable power of attorney encounters no such problems.

Financial planners can identify what their clients’ banks and brokerage firms require in the way of documentation, and in some cases, the power of attorney document’s language can be amended according to the terms their lawyers prefer—although most advisors counsel against a clause that the bank may ask for, waiving the right to sue if something goes awry.

If a bank or brokerage firm rejects a legitimate power of attorney, ask to speak to a supervisor, or try another branch.  Also recognize that some states require financial institutions to accept a power of attorney unless they have reason to report suspected abuse to authorities or are aware that someone else has done so.  These laws, in some states, require financial institutions to pay costs families incur to hire an attorney to enforce the power of attorney that was rejected.

The basic point is to recognize that simply having a lawyer draft a general document may not be enough to accomplish what the power of attorney is designed to do.  It helps to get professional advice on the practical applications of the power of attorney document.

Source:

http://www.wsj.com/articles/when-the-power-of-attorney-lacks-power-1465783682

About Objectively Speaking

Tom Batterman, founder of Vigil Trust & Financial Advocacy and Financial Fiduciaries, LLC is in the business of representing the best financial interests of his clients. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest or expertise to manage such matters on their own. As an objective, unbiased professional who takes on a fiduciary responsibility to his clients, he guides clients to the financial decisions they would make themselves if they had years of training and experience and the time and expertise to fully research and understand all of their options. Founded in 2010 as an outgrowth of Vigil Trust & Financial Advocacy, Financial Fiduciaries, LLC is a financial management solution for individuals and mutual insurance companies who recognize they do not have the time, interest or expertise to properly attend to their financial matters on their own. While there are many financial “advisors”, most of them have investment products to sell and the “advice” they provide is geared toward getting their clients to engage in a purchase. As one of the rare subset of advisors known as “fiduciary advisors”, Financial Fiduciaries does not sell any investment product so its guidance is not compromised by conflicts of interest which plague ordinary advisors. Prior to his employment in the financial industry in financial advocacy and trust positions, he worked at a private law practice in the Wausau area in the areas of estate planning, tax, retirement planning, corporate organizations and real estate. He is a graduate of the University of Wisconsin-Madison and the UW-Madison Law School and has during his career held Series 7, 24 and 65 securities licenses. A longtime resident of the Wausau, Wisconsin Area, Tom is active in the community. He enjoys golf, curling, skiing, fishing, traveling and spending time with his family.
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