Lawyer Monthly - June 2022

JUN 2022 | WWW.LAWYER-MONTHLY.COM ELDER LAW - MIKE AND BRAD BASCOM 27 Are POAs ever declined? In our jurisdiction, healthcare POAs are widely accepted without any problems. The same cannot be said for financial POAs. While many financial POAs are accepted, we are routinely notified of banks and other financial institutions that have rejected a valid financial POA. As mentioned above, springing POAs and POAs that have joint agents are commonly rejected. The other common reasons they are rejected are: (1) the POA is not the form of POA document promulgated by the financial institution, which usually contains lots of exculpatory and indemnification language protecting the financial institution; (2) it does not contain the exact phraseology preferred by that institution (i.e. fight over the semantics of “give” vs “transfer”); (3) there is a suspicion of elder abuse happening (banks and financial institutions are mandatory reporters), or (4) the financial POA is older than the internal policies adopted by the bank or financial institution. While we have seen financial POAs that are nearly two decades old accepted and significant sums of money change hands, the last two calls to our office about POAs being rejected were because the bank said they were too old. After being pressed, both banks said their policy was to reject any POA that was created more than 60 days prior to being presented. Are there workarounds? When a valid financial POA is rejected, the options are to either sue the financial institutionor tosue theprincipal (byseeking a guardianship or conservatorship over the principal). Both require litigation, which can be expensive and time-consuming. In the US, each party pays their own legal fees unless egregious conduct can be proved on the other side. If a guardianship or conservatorship is granted, the court will then oversee all of the financial affairs of the principal each year until their death. To avoid these potential problems, clients are increasingly choosing to incorporate the use of revocable and irrevocable trusts into their estate and elder care plans. POA will list out the various actions the agent may take or incorporate them by reference by citing the relevant state law. Under a general financial POA, the agent is authorised to sign checks, make deposits, manage investment accounts, buy or sell real estate and file tax returns for the principal. The agent typically cannot change the principal’s other estate planning documents (trust, will, etc.), transfer the POA authority to another individual, treat the assets of the principal as their own or gift the assets of the principal unless these powers are specifically enumerated in the POA, and their authority to act expires upon the death of the principal. What liability does an agent have to a principal? Under a financial POA, an agent has a fiduciary duty to act in the best interest of the principal. For that reason, agents should keep very good records of their decisions and be prepared to document their handling of the principal’s property. Unfortunately, not all agents act appropriately and attorneys may be needed to both prove a breach of this duty and to seek recovery of the principal’s property due to misuse or waste by the agent. As a practical matter this can be difficult, so it is incumbent upon the principal to be careful in selecting an agent. How can attorneys help families choose the right POA? Attorneys are uniquely qualified to help families choose the right POA by knowing which POA is appropriate for the client’s needs and then drafting it to match the client’s goals. Before a POA is signed, the attorney provides a valuable service by asking probing questions to determine the fitness of the potential agent and successors. Attorneys also provide guidance by being familiar with the practices of the local financial institutions as concerns POAs. For instance, in our area we have certain financial institutions that will not accept a springing POA or allow joint agents. In discussions with their general counsels, it is clear the institutions do not want to be caught in a legal contest if there is disagreement about a triggering event, so they adopt a blanket rule to not accept any springing POAs. As a practical matter their systems are not set up to handle joint agents, so they likewise refuse to honour those POAs. With proper counselling the client may opt to change financial institutions or rethink naming joint agents. These matters are best addressed before the principal loses capacity. States typically have a standard POA, why should an attorney customize these documents? Most states have promulgated separate forms of POA for both financial and healthcare matters and they are codified in their laws. In our opinion, these laws often reflect a compromise between lobbyists for the financial institutions (seeking to limit their client’s liability) and granting maximum flexibility and creativity as requested by those wanting to create a POA. Experienced attorneys will often start with the state-promulgated POA form and then draft customisations for their client’s unique situation. By starting with the statepromulgated form, it is familiar to the local financial institutions and is more likely to be accepted. In our jurisdiction, healthcare POAs are widely accepted without any problems. The same cannot be said for financial POAs.

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