Rejected POA? Steps to Take When Your Bank Won't Cooperate | Repair The Roof Podcast

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“The beauty of a trust is its flexibility. You can customize it to fit your unique family situation and financial goals. However, this flexibility also means there are a lot of decisions to make.”

Imagine being in your mid-60s, like John and Sarah, and facing the challenge of how to ensure both your surviving spouse and children from previous marriages are taken care of. Our host Ted Gudorf tackles the often-overlooked estate planning nuances for blended families. He shares John and Sarah’s story to illustrate common pitfalls in traditional wills and reveal the powerful solution of using trusts to secure everyone's future and maintain family harmony.

Ted then looks into the intricacies of selecting the right trustee, weighing options from surviving spouses to corporate trustees, and customizing the distribution terms to meet specific needs. You’ll hear about essential considerations like QTIP (qualified terminable interest property) treatment, age restrictions, and special needs trusts to craft an estate plan that aligns perfectly with your unique family dynamics.

Key Topics:

  • Navigating Blended Family Estate Planning Challenges (00:00)
  • John and Sarah’s Estate Planning Dilemma Example (01:53)
  • The Role of Trusts in Blended Family Estate Planning (07:10)
  • Choosing the Trustee and Determining Distribution Terms (09:25)
  • Customizing the Trust to Fit Specific Needs (18:00)
  • Conclusion and Key Takeaways (19:23)

As we age, planning for the future becomes increasingly important. One crucial aspect of this planning is establishing a power of attorney (POA). However, many retirees are unaware of the potential pitfalls that can arise when trying to use a POA, especially with financial institutions. This blog post will explore the challenges surrounding powers of attorney, provide valuable insights, and offer practical solutions to ensure your financial affairs remain manageable, even in times of crisis.

Key Takeaways

  • Financial institutions may reject powers of attorney for various reasons, including age of the document or specific wording.
  • Proactive measures, such as pre-approving your POA with your bank or using a revocable living trust, can help avoid future complications.
  • Understanding the limitations of POAs and exploring alternative options is crucial for effective estate planning.
  • Regular updates and communication with financial institutions can help ensure your POA remains valid and usable.
  • Consulting with an experienced estate planning attorney can provide personalized solutions for your unique situation.

Understanding Power of Attorney: The Basics

Before diving into the potential issues surrounding powers of attorney, let's first establish a clear understanding of what a POA is and why it's important, especially for retirees.

What is a Power of Attorney?

A power of attorney is a legal document that authorizes another person (known as the agent or attorney-in-fact) to make decisions on your behalf. In the context of financial matters, a durable financial power of attorney gives your chosen agent the ability to manage your financial affairs, even if you become incapacitated.

Why is a POA Important for Retirees?

For retirees, having a well-crafted POA is crucial for several reasons:

  1. Continuity of Financial Management: If you become unable to manage your own affairs due to illness or injury, your designated agent can step in to ensure your bills are paid and your finances are properly managed.

  2. Avoiding Guardianship: Without a valid POA, your loved ones might need to go through a costly and time-consuming guardianship process to gain the authority to manage your affairs.

  3. Peace of Mind: Knowing that you have a trusted individual ready to handle your finances can provide significant peace of mind as you age.

  4. Flexibility: A well-drafted POA can be tailored to your specific needs and preferences, giving you control over how your affairs are managed in your absence.

The Hidden Challenges of Powers of Attorney

While a POA seems like a straightforward solution for managing one's affairs, the reality can be far more complex. Many retirees and their families are caught off guard when they encounter resistance from financial institutions when trying to use a POA.

Common POA Pitfalls

  1. Age Restrictions: Many financial institutions are now imposing arbitrary age limits on POAs. For example, some banks may refuse to honor a POA that is more than two or seven years old, regardless of its legal validity.

  2. Specific Wording Requirements: Some institutions may reject a POA if it doesn't contain specific language they prefer. For instance, a local bank might require the POA to explicitly indemnify them for relying on the document.

  3. Institutional Bias: Increasingly, financial institutions are showing a preference for POAs drafted by their own legal teams, rejecting valid documents created by independent attorneys.

  4. Lack of Legal Enforcement: In many states, including Ohio, there are no legal penalties for financial institutions that refuse to honor a valid POA. This lack of enforcement can leave individuals and their agents in a difficult position.

Real-World Scenario

Imagine this all-too-common situation:

Your father has just suffered a stroke, and you rush to the bank with his power of attorney document in hand. Despite the document being legally valid, the bank turns you away, stating that the POA is "too old." You're left frustrated, unable to access the funds needed to manage your father's affairs and medical care.

This scenario highlights the disconnect between legal validity and practical acceptance of POAs, a gap that can have serious consequences for retirees and their families.

The Consequences of a Refused Power of Attorney

When a financial institution refuses to honor a POA, the repercussions can be significant and far-reaching. Here are some of the potential consequences:

  1. Inability to Access Funds: The most immediate impact is the inability to access the account holder's funds. This can be particularly problematic if bills need to be paid or if funds are required for medical care.

  2. Limited Financial Management: Without access to accounts, the agent cannot perform necessary financial tasks such as writing checks, withdrawing funds, or transferring assets.

  3. Forced Guardianship Proceedings: In many cases, the only recourse is to initiate guardianship proceedings through the probate court. This process, often referred to as "living probate," is both expensive and time-consuming.

  4. Delayed Decision Making: The time it takes to establish guardianship can result in delayed financial decisions, potentially leading to missed opportunities or financial losses.

  5. Emotional Stress: The frustration and stress of being unable to help a loved one in need can take a significant emotional toll on families.

  6. Additional Legal Costs: The need to pursue alternative legal routes, such as guardianship, often results in additional attorney fees and court costs.

Proactive Solutions: Safeguarding Your Financial Future

While the challenges surrounding POAs can seem daunting, there are proactive steps retirees can take to mitigate these risks. Here are some practical solutions to consider:

1. Pre-approve Your POA with Financial Institutions

One of the most effective strategies is to present your POA to your bank or broker in advance. Here's how to go about it:

  • Schedule a meeting with your financial institution.
  • Bring your POA document and ask them to send it to their legal team for approval.
  • Request written confirmation of their acceptance of the POA.
  • Keep this confirmation with your important documents.

This approach can help prevent future issues and ensure that your chosen agent will have access to your accounts when needed.

2. Make Your Agent an Authorized Signer

Another practical solution is to make your designated POA agent an authorized signer on your accounts. This is different from making them a co-owner:

  • As an authorized signer, they can access the account and perform transactions.
  • Unlike a co-owner, an authorized signer doesn't have ownership rights to the funds.
  • This arrangement can provide a smoother transition if you become incapacitated.

3. Consider a Revocable Living Trust

For many retirees, a revocable living trust can be an excellent alternative to relying solely on a POA. Here's why:

  • Assets in the trust are managed according to the trust document, bypassing POA issues.
  • You can name a successor trustee who can take over management of the trust assets if you become incapacitated.
  • Trusts typically face less scrutiny from financial institutions compared to POAs.
  • A trust can also help avoid the need for probate after your passing.

4. Stay Informed About State Laws

Laws regarding POAs can vary significantly from state to state. Some states have introduced measures to make POAs more enforceable:

  • Statutory Power of Attorney: Some states have created standardized POA forms that financial institutions are more likely to accept.
  • Penalties for Refusal: A few states have implemented penalties for institutions that unreasonably refuse to honor valid POAs.

Stay informed about the laws in your state and consider consulting with a local estate planning attorney to understand your options.

5. Regularly Update Your POA

While it shouldn't be necessary from a legal standpoint, regularly updating your POA can help avoid issues with financial institutions:

  • Consider updating your POA every few years.
  • Each time you update, inform your financial institutions and provide them with the new document.
  • Keep a log of when you've updated your POA and which institutions have a copy on file.

The Role of Estate Planning in Retirement

Effective estate planning goes beyond just having a power of attorney. It's about creating a comprehensive strategy to manage your assets and healthcare decisions as you age. Here are some additional elements to consider:

1. Advance Healthcare Directive

Also known as a living will, this document outlines your wishes for medical treatment if you're unable to communicate them yourself. It can include:

  • Preferences for life-sustaining treatments
  • Pain management choices
  • Organ donation wishes

2. HIPAA Authorization

This allows your designated representatives to access your medical information, which can be crucial for making informed healthcare decisions on your behalf.

3. Will

While a will doesn't help with incapacity planning, it's crucial for ensuring your assets are distributed according to your wishes after your passing.

4. Regular Review and Updates

Life circumstances change, and so should your estate plan. Regular reviews with an estate planning attorney can ensure your plan remains aligned with your current situation and wishes.

Conclusion: Taking Action for Peace of Mind

Navigating the complexities of powers of attorney and estate planning can be challenging, but it's a crucial step in securing your financial future and peace of mind. By understanding the potential pitfalls and taking proactive measures, you can ensure that your wishes are respected and your affairs are managed smoothly, even in times of crisis.

Remember, the key to effective planning is to act early and stay informed. Don't wait for an emergency to discover that your POA isn't as effective as you thought. Take the time now to review your documents, communicate with your financial institutions, and explore alternative options like revocable living trusts.

Most importantly, don't hesitate to seek professional guidance. An experienced estate planning attorney can provide personalized advice tailored to your unique situation and help you navigate the complexities of state laws and financial institution requirements.

By taking these steps, you're not just protecting your assets – you're providing invaluable peace of mind for yourself and your loved ones. After all, retirement should be a time of relaxation and enjoyment, not worry about financial management in case of incapacity.

*This blog post is based on the insights shared by Gudorf Financial Group. For personalized advice tailored to your unique circumstances, always consult a financial, legal, or tax professional.*

Transcript: Prefer to Read — Click to Open

Ted (00:00.11)

Imagine this. Your father has just suffered a stroke and you rush to the bank with his power of attorney document in hand, only to be turned away. The reason? They say the POA is too old. Sound far -fetched? Unfortunately, it’s a frustrating reality for many. In this video, we’re going to dive into the murky waters of power of attorneys and financial institutions, a topic that could save you countless headaches and potentially thousands of dollars. Whether you’re planning for your future,

or helping a loved one. Stick around to learn the insider tips and hacks that could make all the difference when it matters most. Remember, in a durable financial power of attorney, you are signing a legal document.

that is going to authorize at least one other individual to manage all of your financial affairs, even if you become incapacitated. Now remember, in many states like Ohio, there is no law that says any financial institution has to accept or recognize your power of attorney. What are we seeing happening these days with powers of attorney? What are some of the common pitfalls, some of the common

problems? Well, we see financial institutions regularly rejecting these legally signed powers of attorney. For instance, they are saying that a seven -year -old document is too old. Many are saying that if it’s more than two years old, they won’t recognize it. Perhaps they don’t like the wording of the document. One local bank says that unless the power of attorney language specifically indemnifies them,

for relying upon the power of attorney, they will not recognize that POA. Some financial institutions are rejecting any power of attorney that isn’t drafted by the financial institution. What is the consequence of a refused power of attorney? Well, the bottom line is that if you’ve granted power of attorney to someone, they’re not going to be able to access your accounts at any financial institution.

Ted (02:09.954)

Therefore, they won’t have the ability to write checks or they won’t have the ability to withdraw funds or change beneficiaries or transfer assets into a trust. Instead, what you’re going to be required to do is to go to probate court and do what we call living probate by filing for a very expensive and time consuming guardianship. And you’ll end up with

a guardian of the person and a guardianship of the estate once you demonstrate that the individual is incapacitated. Let’s talk about a proactive solution to this problem. One option you have is when you sign your power of attorney and designate a particular agent, you should present your POA to your bank or broker in advance and make sure that they send it to their legal team and approve it.

Getting the bank’s legal team on board early on is a good way to go about this. Sometimes it also makes sense to make the agent an authorized signer on the account. Not a co -owner, but simply a signer on the account. That should enable the individual to have access to the account in the event you become incapacitated. In some states,

They have introduced what they call a statutory power of attorney. In other words, the specific language of the power of attorney is prescribed by that state’s statute. And they will adopt penalties for financial institutions that refuse to recognize a statutory power of attorney. Unfortunately, we do not have that provision here in Ohio. There is no penalty for anybody refusing to recognize.

a validly drafted power of attorney. Therefore, there’s no ability to go to court and to enforce the POA. While presenting the POA to the bank in advance is one option, my preferred option is rather than relying upon a POA for anything other than a retirement account, it makes more sense to me to transfer accounts to a revocable living trust to bypass all of these POA issues. will also bypass the guardianship issues. Why?

Ted (04:26.869)

because we’re transferring the assets to the trust while you’re alive and well and not trying to deal with them when you’re incapacitated. The trust document will specify who your successor trustee is and at that time your successor trustee will be able to have access to the funds without any challenges coming from the financial institution.

So we’ve covered a lot of ground today from common POA pitfalls to proactive solutions and even some insider hacks. Taking action now can save you immense stress and expense down the road. It’s far easier to address these issues proactively.

than to scramble for solutions in the midst of a crisis. By planning ahead, you’re not just protecting your assets, you’re giving yourself and your loved ones peace of mind. Found this information valuable and want to ensure your estate plan is rock solid. We’re here to help. Take the next step in securing your family’s financial future by visiting www.dateandestateplanninglaw.com/getstarted. There you can schedule a free goals and responsibility conversation with one of our experienced estate planning attorneys.

work with you to create a tailored plan that addresses your unique needs and concerns.

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