Will the Financial Power of Attorney I Signed Be Enforceable?
When a principal signs a power of attorney, he or she expects that it will give the agent all the authority he or she needs his affairs. Unfortunately, that is not always the case. A financial power of attorney is a document whereby the person signing the power, otherwise known as the principal, grants a designated person, otherwise known as an agent or attorney-in-fact, broad authority to mange the principal’s financial affairs. In most circumstances, a power of attorney is effective either immediately or upon the demonstrated incapacity of the principal, in which case it is referred to as a “springing” power of attorney. It may also be referred to as “durable,” in which case it may not be revoked by the principal during his or her incapacity. The authority granted in a power of attorney terminates upon the death of the principal. As long as a power of attorney is prepared and executed in accordance with the laws of the state in which it is signed, it is valid and enforceable in every other state.
It is a widely known fact among estate planning attorneys that banks will not accept financial powers of attorney that have grown stale – in other words, they are more than several years old. No where in the Arizona Statute governing financial powers of attorney, A.R.S. Section 14-5501, does it state that powers of attorney are valid only for a specified period of time. This policy is likely a means of reducing the risk of liability for the bank when the authority of the agent to manage the funds is in question. More specifically, the longer it has been since the power was executed, the greater the likelihood that the authority granted to the agent has since been revoked by the principal. Banks don’t want to turn over money to someone who longer has the authority to manage it, so they refuse to enforce older powers of attorney to reduce their risk of liability. This issue most frequently arises with respect to gaining access to deposit accounts like checking, savings, and money market accounts.
The good news is that powers of attorney do serve their intended purpose in most situations. But what can be done when banks refuse to honor powers of attorney? While one might be able to compel a bank to honor a power of attorney by court order, this is not the most practical solution in most instances. Why? When agents are seeking to enforce powers of attorney, there is almost always some immediate need for the funds they are seeking to acquire. The preferred course of action is the one that will give the agent access to the funds in the shortest period of time while expending the least amount of the principal’s resources. This course of action is typically a petition to appoint the agent, or someone else, as conservator for the principal with funds in need of protection.
Is there anything that you can do to insure that the funds in your bank accounts will be available to your agent to be used for your support? One possible solution is creating a revocable living trust and re-titling the accounts in the name of the trust. The successor trustee of a trust has broad authority to access and manage trust accounts when you can no longer do so yourself. While there might still be a small handful of situations where conservatorship could be required to gain access certain assets, a trust can greatly decrease the potential need. Of course, trusts are not necessarily for everyone. Consult with a qualified estate planning attorney to determine what strategies make the most sense for you.