Did you know – until recently there was no Connecticut law requiring banks or financial institutions to accept a Power of Attorney? Those of you who do know – have likely seen first-hand the problems this caused. A new Connecticut law, at last, has come to the rescue. (See notes below on Adoption of Connecticut Uniform Power of Attorney Act). This blog highlights the benefits of the new law and reasons Powers of Attorney are rejected, sometimes for valid reasons, sometimes not:
Here’s the top 2 reasons Powers of Attorney are rejected:
- Drafting problems. Banks, financial institutions and others can and often do refuse to accept a Power of Attorney (POA), because it doesn’t state the specific authority for what the agent wants to do. For instance, the agent appointed under the POA wants (often needs) to access a safe deposit box, but the document doesn’t specifically mention a safe deposit box. Documents can be more carefully drafted to avoid these types of problems; and
- Internal bank policies. Powers of Attorney also get rejected without any really legitimate reason other than “our policy is such and such…” and your document doesn’t meet their policy. While banks came under greater scrutiny since the 2008 Wall Street debacles (through laws like Sarbanes Oxley (SOX) and Gramm Leach Bliley (GLBA) and some of the policies they adopted were intended to protect consumers, all too often POAs are rejected for reasons that boggle the mind. In one instance I know of a bank rejecting a POA, because it was executed more than 6 months ago. A number of other larger, well-known banks have adopted polices requiring POAs be no more than 12 months old or they reject them. Needless to say, this caused a lot of unnecessary turmoil. In many instances a perfectly good POA is rejected, because of these types of these internal policies.
Yes, banks can and do get away with this – until very recently there was no state law requiring them to accept an otherwise perfectly validly POA. Some banks have even have gone so far as to require their own forms be signed – huh, how practical is this? It doesn’t take a rocket scientist to understand how this completely defeats the entire purpose of having these forms prepared and in the hands of those appointed before they’re actually needed. For anyone attempting to act on behalf of a principal in a time of need; especially when the principal is incapacitated or unavailable and the agent has important duties to perform this can be a nightmare. The result is often engaging legal counsel to fight the battle, creating a new POA (if the principal is available and competent) or as a last resort needing to go to probate court for a conservator to be appointed – more unnecessary expense and delay.
This new law is incredibly welcome news. The law creates a presumption of validity for a person who accepts a POA if they believed in good faith it was validly executed. The law also limits the circumstances under which a POA can be rejected – for example, when the bank knows the POA was terminated or that it violates a state or federal law, perfectly legitimate reasons. Also included in the new bill is a provision allowing the probate court to require the person who rejects a POA to accept it and can also award attorney’s fees and costs to the prevailing party – very welcome news! (See sHB6774 for the full text of the bill – effective date October 15, 2015 was revised to be effective July 1, 2016).
If you want to avoid these costly, lengthy (often unnecessary) issues that frequently arise with some POA forms, we recommend carefully reviewing your current documents to make sure they still meet your needs with the assistance of a qualified attorney. There are also some important new provisions in the new law that POAs should be updated to include. If you need assistance with this review, please contact me for a consultation.
(For readers of this blog unfamiliar with POAs – Powers of Attorney are created and used for a lot of different reasons, but the primary purpose is designating someone (called the agent) to legally make decisions or take actions on behalf of the principal. The powers granted can be very limited or specific or they may be very broad. In the estate planning context, powers of attorney are often durable, meaning they survive the incapacity of the principal. Once incompetent, a person cannot enter into a new POA (or any contract for that matter.)