A power of attorney is a legal agreement that allows a Principal (the person who executes the power of attorney, or POA) to grant authority to an “Agent” to act on behalf of the Principal in legal matters and financial transactions. Given the frequency with which POAs are used you might think that the authority of an Agent under a POA is never questioned; however, the truth is that third parties refuse to honor POAs all the time. The question then becomes “ Must a third party honor a power of attorney? ”
A power of attorney may be used to accomplish a wide range of goals and objectives. A general POA, for instance, is often used as a long-term incapacity planning tool. A limited power of attorney, on the other hand, is often used to resolve short term problems. For example, if your house is for sale plan to be out of the country for several weeks you might grant someone power of attorney to act as your an Agent at the closing on your home in the event it sells while you are away. A power of attorney only works, however, if the third party to whom it is presented honors the Agent’s authority granted in the POA agreement.
Although the law in most states clearly requires a third party to honor an Agent’s authority, banks and other third parties do sometimes refuse to honor a valid power of attorney. Common reasons given by a third party for refusing to honor a POA include:
Validity – a third party may simply question the validity of the document itself.
Staleness – a valid POA does not usually “expire” unless the agreement itself includes a termination date, yet third parties are sometimes reluctant to accept the authority of an Agent if that authority was granted several years ago.
Form – banks and other financial institutions often refuse to accept a POA unless it was executed using the institution’s own POA form.
If you are the Agent under a POA agreement and a third party has refused to honor the authority granted to you it may be possible to resolve the issue by simply re-writing the POA or using the institution’s own POA form. Often, however, that is not a viable option. For example, if the Principal is incapacitated and, therefore, unable to execute a new POA document you will need to focus on getting the original document honored by the third party. This will likely require you to consult with an experienced estate planning attorney who may be able to communicate with the third party on your behalf and/or take legal action if necessary. An experienced estate planning attorney is a valuable teammate to have.
If you have additional questions or concerns about a power of attorney, or your estate plan in general, contact the experienced estate planning attorneys at Nash, Nash, Bean & Ford, LLP by calling 800-644-5345 or 309-944-2188 (Geneseo) or 309-762-9368 (Moline) to schedule your appointment today.
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