Ask the Expert: Can Banks Refuse to Accept a Power of Attorney?

Q. My cousin’s parents executed a Power of Attorney naming her and her sister as co-agents. My aunt is now deceased. My uncle, who has dementia, is owner of an investment portfolio with monthly dividends being automatically reinvested. My cousins wish to have the dividends placed into my uncle’s checking account so that they may use the funds for monthly fees at a memory-care center. Wells Fargo recently told them that they will not honor the Power of Attorney because it is a ‘joint’ Power of Attorney. Apparently the bank would honor the Power of Attorney if the document specified that my cousin or her sister were able to act alone. My uncle can no longer sign his name in order to modify the existing Power of Attorney. Can the bank do that, and how can I avoid it happening to me, should I find myself in a similar situation?

A. A properly-drafted Financial Power of Attorney is the most important legal documents that a person can have, and is an essential part of every Incapacity Plan and Estate Plan. It authorizes an agent, sometimes called “Attorney-in-Fact,” to act on your behalf and sign your name to financial and/or legal documents.

Several states, including Virginia and Maryland, have passed statutes requiring that banks accept a Power of Attorney under certain circumstances. In Virginia, a bank must accept a notarized Power of Attorney unless a statutory exception applies. Unfortunately, one very broad statutory exception is that a bank is not required to accept a Power of Attorney if it believes in good faith that the agent does not have the authority specified in the document or that the agent has been relieved of his authority.

To protect themselves from liability, banks, especially large banks such as Wells Fargo, have been known to reject powers of attorney, for fear of being parties to fraud. For instance, some banks, including Wells Fargo, have started rejecting documents that were signed more than twelve months ago, that are from out of state, or for other reasons, making it much tougher for well-meaning adult children to take the reins when their parents’ health falters.

So, even with the best power-of-attorney documents, it’s sometimes still hard to get some banks to honor them because of liability concerns. However, there are ways to draft these legal documents to improve the chances that banks will honor them—and that loved ones won’t misuse them. But it takes careful planning with an experienced Elder Law Attorney such as myself. So what can you do to make sure your Power of Attorney doesn’t spark tussles with banks?

  • Set it up early: It is prudent to set up a Power of Attorney while you are still healthy and in full control of your faculties. You need to be comfortable with the person to whom you’re giving Power of Attorney, since it generally can be invoked at any time. You need to decide whether to make the powers you authorize narrow or broad, make sure you trust the person you’re granting them to, and understand when these powers take effect.
  • Set it up with the Right Attorney: Every power of attorney document is different, and most power of attorney documents are not worth the paper they are written on. There is no standard “form” that you can download from the Internet or obtain from some online legal services provider that is going to be suitable for your specific needs. I review an average of ten power of attorney documents every week that have been done by people on their own, or prepared by attorneys who are not experts in Elder Law. Invariably, I must prepare a new power of attorney because the ones presented to me are almost always severely lacking important / essential provisions. It is much simpler and less expensive to get it done properly the first time then to have to pay twice to have a bad document redone and then have the hassle of going back to various financial institutions and your agents in order to replace your old power of attorney with your new one.
  • Get a Capacity Evaluation: If you are over 62 and if you think that the day might possibly come in the future where you might need a reverse mortgage, then shortly after signing your power of attorney, you should have a competency evaluation done by your doctor to confirm that you were competent to sign the power of attorney. This document, which we provide to our clients, will be required in the future by any reverse mortgage lender if your agent tries to use your power of attorney to obtain a reverse mortgage for your benefit, such as to pay for in-home healthcare to prevent you from having to move to an assisted living facility or nursing home.
  • Keep It Current: The best way to avoid pushback from banks, brokerages, fund companies, and other asset-holders is to renew/update your Power of Attorney every year. Our firm offers a Lifetime Protection Program whereby we will update your POA every year, along with lots of other legal services.  For example, if you are a client under our Lifetime Protection Program, we will fight the bank for you if a bank refuses to honor your power of attorney.
  • Avoid Co-Agents Who Are Required to Act Jointly: Having co-agents is fine if the two agents get along well and will not work at cross-purposes, but have the POA drafted so that either agent can act separately. This way you will not run into the problem that you have currently found yourself in. Banks do not want to honor a joint power of attorney were both agents must sign because banks do not want to be responsible for policing this “double signature” requirement.
  • Set up a Revocable Living Trust: The purpose of a Power of Attorney is to avoid the nightmare of lifetime probate if you also want to avoid the nightmare of after-death probate, you should set up a Revocable Living Trust (RLT), because a Will puts your estate through the nightmare of after-death probate.  An RLT also offers protection from incapacity by providing uninterrupted management of your trust assets by your trustee.

Problems with Wells Fargo

As you may have heard in recent news, Wells Fargo is being sued for participating in illegal practices such as requiring customers wanting one product to purchase additional ones. The lawsuit also alleges the bank is allowing bankers to create debit card PIN numbers, often without customer authorization, to enroll a customer in online banking, charging bogus fees, and delaying the opening of new accounts or processing a sale until a time that is most beneficial to the bank.

If you are a Wells Fargo customer, be sure to review your banking accounts and records, and check your credit report. Check to see if there are any unauthorized checking and saving accounts in your name, and if accounts you thought you closed remained opened.

Also, beware if you are a Wells Fargo customer, that I have heard of them not only refusing to accepting valid Powers of Attorney, but also refusing to accept court orders establishing someone as a conservator, and refusing to honor the ability of a successor trustee of a trust to access trust funds. It is important to consider this when you are doing your planning and thinking about the future.

Plan Ahead and Be Prudent

We here at The Law Firm of Evan H. Farr, P.C. believe that senior consumers should have access to all of the information and consumer protections they need to make important decisions.  As you know, one of the most important decisions you can make it to plan for your future and for your family. If you have not done Incapacity Planning or Estate Planning, or if you have a loved one who is nearing the need for long-term care or already receiving long-term care, the time to plan is now.

In addition, if you have not updated your planning documents in a while, don’t let too much time pass between reviews of your plan. The cost of a review is minimal; but the cost to your family if you neglect your plan could be disastrous.  Be sure to ask about The Farr Law Firm’s Lifetime Protection Program, which ensures that your documents are properly reviewed and updated as needed, so that they will have the proper effect under the law.

Please contact The Law Firm of Evan H. Farr, P.C. as soon as possible to make an appointment for a no-cost consultation:

Fairfax Power of Attorney: 703-691-1888
Fredericksburg Power of Attorney: 540-479-1435
Rockville Power of Attorney: 301-519-8041
DC Power of Attorney: 202-587-2797

Choose Your Trustees Wisely

Kristen Booth Glen, judge in The Matter of Mark C.H.

Mark is an autistic adult who resides in a Medicaid-funded residential program in upstate New York. Before his parents passed away, his mother established a Special Needs Trust for him, which held in excess of $2 million, with the two co-trustees being an attorney and a well-known trust company. As a result of the trust, Mark had plenty of money, but what he lacked was a friend or family member to advocate for his needs.

At the facility where Mark resides, the primary focus of administrators is to provide a safe environment for residents. The program administrators did make suggestions about possible expenditures to supplement Mark’s care, but they were not responsible for determining how private dollars should be spent. That was the responsibility of the trustees. Or so thought Mark’s mother when she established the trust.

In Mark’s case, referred to as The Matter of Mark C.H., a court reviewed the accounts of the trustees to see how funds in Mark’s trust were being spent, only to discover that the co-trustees regularly took commissions for themselves, but spent practically nothing on Mark, and made no effort to determine if they should be doing so. And because Mark did not have a family member, guardian, or advocate looking out for him, no one knew this was happening.

Unfortunately, like Mark, many beneficiaries of Special Needs Trusts lack the ability to advocate on their own behalf. As a result, many trustees, unsure of the beneficiary’s needs, and lacking a family member, trust advisor, guardian, or advocate to provide this information, will simply do nothing without receiving a request. Funds that could be used to make the beneficiary’s life better, such as expenditures for additional therapy and services, better medical equipment, recreational opportunities, and/or private case management and advocacy, often go unused.

In the past, as long as a trustee did no harm and invested prudently, filed tax returns, and kept good records, there would be no liability. However, The Matter of Mark C.H. may help change things. The decision the judge in the case made was that the trustees were not entitled to the compensation, because they failed to be proactive in trying to identify the beneficiary’s needs. In the words of the judge:

“It was not sufficient for the trustees merely to prudently invest the trust corpus and to safeguard its assets. The trustees here were affirmatively charged with applying trust assets to Mark’s benefit and [were] given the discretionary power to apply additional income to Mark’s service providers. Both case law and basic principles of trust administration and fiduciary obligation require the trustees to take appropriate steps to keep abreast of Mark’s condition, needs, and quality of life, and to utilize trust assets for his actual benefit. While the accounting in this trust is not yet complete, their failure to fulfill their fiduciary obligations should result in denial or reduction of their commissions for the period of their inaction.”

Ultimately, Mark’s trustees retained a private care manager to help ascertain how Mark’s life could be enhanced through the proactive use of trust funds, and Mark responded well.

As you can see from Mark’s situation, millions of dollars sitting dormant in a trust account didn’t help him. But a small fraction of those dollars, spent under the guidance of a dedicated advocate, made a big difference for him.

Choosing a Trustee for a Special Needs Trust

Mark’s story reinforces the need to choose trustees carefully. Choosing someone who is reliable is crucial, because although the law imposes a duty on trustees to honestly and faithfully carry out the trust’s terms, in most cases, there is no court supervision to ensure this is actually happening.

Qualities of a Special Needs Trustee should include:

Willingness to serve: Clearly explain to potential individual trustees what their duties would include, and under what conditions they would serve. Be sure they accept the role, and responsibilities that go with it, before you assign it to them. Otherwise, when it comes time for them to serve, they might decline or mismanage the trust. You may consider providing them with a written letter, or “job description,” outlining their duties in the role.
Honest person: An honest and honorable trustee will make decisions based solely on the beneficiary’s needs, not their own.
No Conflicts of Interest:  A special needs trust must be managed for the benefit of the beneficiary. This means that the person serving as trustee must not act in his or her own best interests—or the interests of others—when making investment or spending decisions.
Familiarity and Empathy with the Beneficiary: The ideal trustee must continue advocacy upon the parents’ incapacity or death. For a special needs trust to function smoothly, the person serving as trustee should have a good working knowledge of the beneficiary’s needs. Also, the more familiar a trustee is with a beneficiary, the less likely it is that the trustee’s decisions will be based on bias or misconceptions about people with disabilities that are, unfortunately, all too common.
Closeness in Age to the Beneficiary: When you’re choosing a trustee, you should do your best to find someone who will be around as long as the beneficiary needs the trust. This means you need to think about both the trustee’s life expectancy, and the life expectancy of the person with special needs. If your ideal trustee is a bit older, or becomes ill or unable to carry out the responsibilities set forth in the trust document, you should have an alternate trustee named in the trust document. If you do not have an alternate trustee named, then the trustee should at least have the ability to appoint a successor.
Familiarity with SSI and Medicaid: Each trustee you name will need to become familiar with the rules that determine eligibility for SSI and Medicaid—and how the special needs trust can be used to supplement the beneficiary’s needs without violating these rules. It is essential to get help from an experienced special needs planning attorney, such as myself, when it comes to these matters.
Financial Knowledge and Competence: All trusts have certain duties concerning tax planning and maintaining books. The trustee must also oversee the investments in the trust and diversify them so that they are neither too conservative nor too aggressive. The discretionary nature of a Special Needs Trust intensifies those needs, especially when the beneficiary needs assistance advocating for himself or herself.

Naming Co-trustees

Few family members will possess all the necessary characteristics to be a successful trustee. Similarly, many large bank trust companies are not skilled in handling Special Needs Trusts and are not structured to provide the level of care and contact most families desire. Often, the optimal solution will be to pair a family member who possesses a strong relationship with the beneficiary and a professional as Co-Trustees.

Using a Trust Advisor

In situations in which there is no family member who is willing and able to serve as co-trustee, or you do not have a trustee who is familiar with the needs of the beneficiary and empathetic with those needs, then a Trust Advisor should be appointed in the trust document to advise the trustee as to the needs of the beneficiary. The Trust Advisor can be an individual, or a group of individuals acting as a committee

Using a Trust Protector

In addition, a person can be named in the trust document as a Trust Protector. This person can remove a professional trustee and replace them with a new professional trustee, should the need arise.

Pooled Special Needs Trusts

Pooled third-party trusts are an alternative to setting up your own special needs trust if you can’t come up with a good choice for trustee or if you are only putting a modest amount of assets into the trust. They can be advantageous because the people managing the trust and its assets are typically attuned to the special needs community and knowledgeable about agency rules regarding SSI and Medicaid programs. In addition, even if you don’t have a lot of money to leave to your loved one, a third-party pooled trust provides a way to benefit from a special needs trust without having to create one yourself. Read more here.

Special Needs Planning

If you haven’t done so already and you have a special needs child or grandchild that will likely need assistance for life, it is vitally important to take the right steps to ensure the child will be financially secure and cared for in the event of death or disability of the parent, including:

•Hiring an attorney who is experienced in creating special needs trusts, such as myself;
•Clearly spelling out your wishes for the disbursement of trust funds within the trust document;
•Finding someone you can trust that has your child’s best interests at heart to serve as trustee and/or
•Hiring an institutional trustee that has a reputation for utilizing social workers and case managers to monitor the welfare of beneficiaries and determine how trust funds should be spent.
When it comes to special needs planning, The Law Firm of Evan H. Farr, P.C. can guide you through this complex process. If you have a loved one with special needs, call one of our offices to make an appointment for a no-cost consultation:

Fairfax Special Needs Trusts: 703-691-1888
Fredericksburg Special Needs Trusts: 540-479-1435
Rockville Special Needs Trusts: 301-519-8041
DC Special Needs Trusts: 202-587-2797

Ask the Expert: I Am Young and in Good Health. Why Plan Now When I Can Probably Wait?

Q. I am in my 40’s and run marathons. I am in better health now than I have been in my entire life. My family eats only organic foods, and we are hardly ever sick. My grandparents are still alive, and they are in their 90’s, and my husband has a grandmother who is 102! If heredity has anything to do with it, we have long lives ahead. In addition, my husband and I are safe drivers, and typically take the metro or bike to work. We don’t participate in many dangerous activities, unless you consider skiing to be dangerous. Should people like us even plan for incapacity, when the likelihood is nothing will happen to us?

A. Kudos on your healthy lifestyle! It’s true that exercise and healthy eating have countless benefits and can help stave off disease. But what happens if something unexpected happens to you or your spouse?

For example, what if you got into a bike accident that leaves you unconscious, or your doctors need a last-minute decision about something while you are sedated for surgery. When you can’t speak for yourself, you want to make sure your medical and financial wishes are honored. And that means spelling out your specific preferences on paper and choosing someone you trust to handle decisions for you.

Take, for example, a much publicized case from ten years ago. Terri Schiavo of Florida did not anticipate slipping into a coma and then having her husband and parents fight over her medical care and ultimate wishes for the next 15 years while she lay brain-dead and on a feeding tube. She did not anticipate a legal back-and-forth between her husband and her parents, that ended up in the Supreme Court, with even the President and the Pope involved. I am sure she would have never wanted that for her family, during such a difficult time for everyone. Keep in mind that she first landed in the hospital when she was only 26, proving you never know when something unexpected can happen and you’re never too young to detail your life wishes.

Less than a third of the population has completed Incapacity Planning documents. This often leads to wishes not being met, court involvement and supervision, and more stress and grief for loved ones.

Why don’t people plan for incapacity?

Reasons often range from a natural tendency to procrastinate, the preconception that it is a costly and complex process; and sometimes even the superstitious feeling that if you don’t ask for it, it won’t occur. Another common belief is that if we become unable to make decisions for ourselves, our family will decide what is best for us. All of these reasons can lead to difficult and emotionally charged situations if you or a loved one becomes incapacitated, which could easily be avoided with proper Incapacity Planning.

To begin the Incapacity Planning process, people of all ages should sit down with their family members to openly discuss their needs and the roles of loved ones in assuring those needs are met. Important topics of discussion for families should include caregiver roles, financial considerations, and incapacity wishes. Because of the difficulty of such topics, many families don’t have the conversation until it is too late. For more details on how to broach this conversation with a loved one, please read our blog post on the topic.

Important Incapacity Planning Documents

Once this important conversation occurs, and important decisions are discussed, it is important to work with a qualified elder law attorney (preferably a Certified Elder Law Attorney) to ensure that the Incapacity Planning documents listed below are in place. Doing so is the best way to ensure that your wishes are met should you become unable to make important decisions for yourself.

• Advance Medical Directive. An Advance Medical Directive communicates your desires to your physicians and family members regarding all forms of medical treatment, and may be used to instruct your physician to withhold or implement specific life-prolonging procedures if at any time you are diagnosed as having a terminal condition and your physicians have concluded that there is no chance of recovery. Without this document, families could have serious disagreements, or someone who doesn’t share the individual’s values may be making the decisions.  Our firm includes within this document a proprietary Long-Term Care Directive, which discusses numerous issues with regard to long-term care should you ever find yourself in need of long-term care at home, or in assisted living, or in a nursing home.

• Financial Power of Attorney. When you give someone Financial Power of Attorney, you are giving that person the right to access all or portions of your finances. The document typically goes into effect immediately after it is signed, but is intended to be used by your Agent only when needed. This person would be in charge of your finances if you become incapacitated. Having a Financial Power of Attorney in place avoids the “nightmare of living probate” — the time consuming, expensive, and publicly embarrassing process whereby someone has to go to court to have you declared mentally or physically incompetent and then one or more persons need to be appointed to serve as your conservator, which process is subject to ongoing probate court supervision.

• Revocable Living Trust: A Revocable Living Trust (RLT) generally provides for the creator of the trust (and, if applicable, the creator’s spouse) to have full use of the trust income and principal for life. A major benefit of an RLT is avoiding the costly and public probate process. An RLT also offers protection from incapacity by providing uninterrupted management of your assets by your trustee and sparing you and your family the potential publicity and expense of a court-appointed guardianship.

To ensure your wishes are met, it is important to start your planning now, so you are prepared in case a crisis occurs. If you have not done Incapacity Planning or Estate Planning, or if you have a loved one who is nearing the need for long-term care or already receiving long-term care, please contact The Law Firm of Evan H. Farr, P.C. as soon as possible to make an appointment for a no-cost consultation:

Fairfax Elder Law: 703-691-1888
Fredericksburg Elder Law: 540-479-1435
Rockville Elder Law: 301-519-8041
DC Elder Law: 202-587-2797

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