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 transfer of the particular 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.