Q. I have heard friends complain that their parent’s financial power of attorney was not honored by their bank. Is there a way to avoid this?
A. Unfortunately, we hear that complaint from time to time. While there may be no way to draft a power of attorney that completely eliminate the risk that it will not be honored at the time of need, here is my short list of steps you can take to minimize that risk:
- Sign the Bank’s Own Forms: most banks and other financial institutions have their own, short form Power of Attorney with which they are familiar. While the bank’s own forms are more limited and are usually targeted to specific accounts, signing them – in addition to your attorney-drafted document — usually eliminates the risk that your designated agent will have problems at that bank down the road.
- Include Hold Harmless Provisions in Your DPOA: financial custodians are concerned about their exposure if they mistakenly rely upon a Durable Power Of Attorney (“DPOA”) that appears valid on his face. It sometimes helps if your DPOA includes specific language that a bank or other custodian will be held harmless if it relies, in good faith, upon a DPOA presented to it.
- Fully Describe Real Property: title companies are sometimes reluctant to honor a DPOA that refers, generally, to “all real property”. Their comfort increases dramatically if the DPOA recites, specifically, the full legal description of each piece of real property covered by the DPOA.
- Preserve Evidence of Capacity: if you anticipate any question down the road as to whether an elderly signer knew what he was signing at the time the DPOA was executed, consider asking him to secure a letter from his doctor that the elder has full capacity to sign such documents. That letter can then be kept on file to be shown to any financial institution should such concern later arise.
- Keep the DPOA Current: third parties are often concerned if a DPOA has been signed so long ago so that it is “stale” in their eyes. I recommend re-executing a financial DPOA at least every 3 to 5 years and, if possible, annually.
- Offer a § 4305 affidavit: custodians are sometimes concerned that the DPOA may have previously been revoked. To allay that concern, the agent can submit an affidavit to the custodian, made pursuant to section 4305 of the Probate Code, that the DPOA has not been revoked. Once completed, that affidavit becomes conclusive proof of non-revocation.
- Anticipate Language That the Custodian May Prefer: if the DPOA is being created to be used at a specific bank or title company, ask whether it prefers specific language in the DPOA and, if so, incorporate same in your document.
- Legal Proceedings to Enforce Acceptance: as a last resort, consider a lawsuit. The law provides that a third party who refuses to honor a DPOA, after being provided a 4305 affidavit, may be liable for the petitioner’s attorney’s fees incurred in the court proceeding. Bringing this to the custodian’s attention often generates the desired compliance.