A Power of Attorney Without Power
On May 6, 2016, the New York Times ran an article by Paula Span for the New Old Age series, Finding Out Your Power of Attorney Is Powerless. Experienced elder law attorneys are unlikely to be surprised by the point made in the article: financial institutions want customers to use their own powers of attorney, not one drafted by the customer’s lawyer. The article notes this is “very unwelcome news, because by now the older account holders may not be competent to sign legal forms.” One frustrated customer offered this insight “[w]e have a power of attorney, but we can’t use it … People sign these anticipating incapacity. Once incapacity arrives, it’s too late to sign another one.”
As the article notes, this isn’t a huge revelation to elder law attorneys but “[i]t’s not clear how often similar scenarios, with their Catch-22 absurdity, take place.” The article offers the other side of the issue, from the financial institution’s perspective, since these institutions are in charge of the customer’s money, and everyone knows about the increase in financial exploitation, issues with diminished capacity of customers and family members who are the perpetrators. But notes one expert, “banks have other motivations, too. ‘Typically, when they’re insisting on their own forms, they’re concerned about liability,’”
The article offers suggestions-have a lawyer intercede with the financial institution or be proactive and “ask… a brokerage or bank if it requires its own durable power of attorney document and, if it does, having your relatives sign it when they are still capable of doing so. You’ll have to do this for every institution where they have an account.” There is a big caveat with this second suggestion, according to the article, quoting Craig Reaves, a past president of NAELA: “read those bank forms carefully or have a lawyer review them, Mr. Reaves advised. They can contain disadvantageous indemnity or arbitration clauses, or provisions that contradict the individual’s general power of attorney. In such cases, ‘I’ll tell clients not to sign, and we’ll fight the fight,’ he said.” Some family members caught in the catch-22 came up with their own solutions, such as opening accounts at other financial institutions or waiting until the parent is having a “lucid moment” to sign the bank’s form.
It’s hard to explain to students why a financial institution refuses to accept a legally valid DPOA drawn by an attorney. This article sheds some light on the problem, but clearly, it’s still a problem.