Why Your Financial Institution May Not Accept Your Power of Attorney

A financial power of attorney can be one of the most practical documents in an estate plan because it allows a trusted person to handle financial matters if the signer can no longer act. Families often assume that once the document is signed, the agent can simply walk into the bank and take care of whatever needs to be done. The surprise may come later, often during an emergency, when the institution asks more questions, requests more paperwork, delays the transaction, or refuses to honor the document.

That situation can feel frustrating because the whole point of the power of attorney was to avoid delay. The client chose an agent, signed the document, and expected the agent to have authority when needed. From the institution’s perspective, however, the document may raise practical questions. The financial institution may need to confirm that the power of attorney is valid, that the agent has authority for the specific transaction, that the document has not been revoked, and that the transaction does not raise concerns about fraud, exploitation, or misuse.

A refusal does not mean the power of attorney is invalid. An institution may hesitate because the document is many years old, because it does not clearly authorize the requested action, or because the agent cannot provide the additional information the institution requires. Some financial institutions may ask for an agent certification, an opinion from counsel, a translation, identification, or review by the bank’s legal department before they allow the agent to act.

Many states have tried to address this problem by creating laws for when a third party must accept a power of attorney and when it may refuse. Some laws give financial institutions and other third parties a set period of time to accept the document, reject it, or ask for additional information. Some laws also allow a court to order acceptance and, in certain cases, require the refusing party to pay attorney’s fees, costs, or damages if the refusal was not legally justified.

Those laws will help agents and families, but they do not make every institution’s refusal improper. A financial institution may still have a valid reason to pause when the document appears defective, the agent appears to exceed the authority granted, the bank knows the power of attorney was revoked, or the transaction would violate state or federal law. An institution may also act cautiously when it has a good-faith concern that the principal may be the victim of financial abuse, neglect, exploitation, or undue pressure.

For clients, the best planning is to reduce the chance of a refusal before anyone needs to use the document. A power of attorney that was signed years ago may still be legally valid, but an older document can create practical problems. The named agent may no longer be the right person. The client may have changed banks, opened new accounts, bought or sold property, started a business, moved to another state, or experienced a major family change. A current document gives the agent a better chance of being recognized quickly.

The language in the document also matters. Some transactions require more than broad financial authority. Depending on state law and the client’s goals, the power of attorney may need to specifically authorize the agent to handle retirement accounts, deal with real estate, make gifts, change beneficiary designations, transfer assets to a trust, manage business interests, or access digital assets. If the document does not clearly grant the power the agent wants to use, the bank may refuse to let the agent proceed.

Do not wait until an emergency to find out whether a financial institution will accept the power of attorney. If the document has not been reviewed in years, contact your Estate Planning attorney to make sure it still reflects current law, names the right agents and successors, includes the powers the agent may actually need, and coordinates with the client’s accounts and overall Estate Plan. A signed power of attorney is important, but a power of attorney that works when the family needs it is what truly protects the client.

Jensen Puno
Staff Attorney
American Academy of Estate Planning Attorneys, Inc.
9444 Balboa Avenue, Suite 300
San Diego, California 92123
Phone: (858) 453-2128
www.aaepa.com