Banks & POAs
A primary purpose in executing a power of attorney for financial matters, is to grant an “agent” (attorney-in-fact) the authority to conduct banking transactions if, and when, the elder (principal) is no longer able. However, sometimes a bank employee has a problem with recognizing the validity of the power of attorney. They hand the agent the bank’s own power of attorney form, and instruct the agent to have the elder’s signature notarized on it. Hmmm …
First, some clarification. Most powers of attorney are called “springing powers”. That term may not actually be included in the document itself, but the language of the document states that the power is effective only if the elder becomes mentally incapacitated and unable to make sound financial decisions. Most powers of attorney require the written declaration, under penalty of perjury, of at least one qualified medical doctor who states – for example: “The elder is my patient, she suffers from A, B, and C, and as a result, is no longer able to make sound financial decisions.”
The doctor’s declaration can then be stapled to the back of the power of attorney and has now “sprung” into being, so to speak.
Contrast that with a power of attorney that becomes effective immediately – without regard to incapacity (i.e., not a “springing power”). These should seldom be used. This immediate power of attorney may also state that, even if the elder becomes incapacitated, the authority will continue. This is known as a “durable” power of attorney.
Now back to the problem with the bank.
The purpose of the power of attorney was to have it executed by the elder while s/he still had the mental capacity to do so – that is, the ability to understand that by signing such a document, they were giving their financial authority to their agent in case of the elder’s subsequent incapacity. Now, when the elder is incapacitated, the bank says the original power of attorney is no good.
California Probate Code Section 4300, et seq., govern the use and authority of these financial powers of attorney. A third person (i.e., bank)must give an attorney-in-fact acting pursuant to a valid power of attorney the same rights and privileges that would be given the principal (elder) if the principal were personally present and able to act.
Of course, the bank wants to protect both itself and its elderly client from any improper use of the power of attorney by the agent. In so doing, the bank may first request that the agent provide proper identification, and even samples of signatures of both the agent and elder (principal) to confirm the identity of both. If the bank made this request, it would require that the agent locate other documents that contained the elder’s signature and present those to the bank as further evidence. The bank can also require the agent to provide the current and permanent residence addresses of the elder before agreeing to honor the power of attorney – and agree to transact any banking business with the agent.
The bank will not be held liable for relying, in good faith, upon the validity of a power of attorney so long as the following conditions are met:
1. The power of attorney is presented to the bank by the agent.
2. The power of attorney appears on its face to be valid.
3. The power of attorney includes a valid notary public’s certificate of acknowledgment or is signed by two witnesses.
If, after all this, the bank still refuses to honor the power of attorney, then the recourse is to petition the court and obtain an order that confirms the validity of the document and the agent’s authority.