A Power of Attorney is one of the most well-known of all estate planning documents. Most people execute one, or are named as an Agent under one executed by someone else, at some point during their lifetime. Although the basic concept behind a Power of Attorney (POA) is relatively simple, putting a POA to the test can become problematic. For example, what do you do if a third party – a bank or another financial vendor – refuses to accept a POA? To help answer that question, the Overland Park estate planning attorneys at Parman & Easterday explain what happens if a third party refuses to honor a Power of Attorney.
Understanding How a Power of Attorney Works
A Power of Attorney is a legal document that allows you ( the “Principal”) to grant another person (the “Agent”) the authority to act on your behalf in legal matters and transactions. The type and extent of the legal authority you grant to an Agent depends on the type of POA you create.
Types of Power of Attorney
To begin with, a POA can be general or limited. A general POA grants your Agent almost unlimited power to act on your behalf in a wide variety of settings and under a wide variety of circumstances. With your general Power of Attorney, your Agent may be able to do things including withdraw funds from your financial accounts, sell property and assets owned by you, and even enter into contracts in your name. A limited POA, on the other hand, only grants limited authority to your Agent. You decide what authority you want your Agent to have. You might, for instance, grant an Agent the specific power of attorney to enter into a lease agreement in your name because you are out of the country and cannot complete the transaction yourself. Parents with minor children also frequently make use of a limited POA as it provides a way to give a caregiver the authority to consent to medical treatment in the event of an emergency. Finally, both a general and a limited POA can be made durable. Making a POA durable simply means that the authority granted to the Agent survives the incapacity of the Principal.
What Do I Do If a Third-Party Won’t Honor a Power of Attorney?
For the most part, a Power of Attorney is governed by state law with most states imposing some limits on the authority that can be granted to an Agent in even a general POA. Nevertheless, the law has long made it clear that a third party is legally required to honor an Agent’s authority when presented with a valid power of attorney. Though the law requires a third-party to honor the authority vested in an Agent under a POA, third-parties sometimes still refuse to honor that authority. The most common reasons given by a third-party that refuses to accept a POA include:
- The third-party questions the validity of the POA. A third-party may outright question whether a POA is genuine, whether a signature is really that of the Principal, or whether the person presenting the POA is really the named Agent. Most state laws allow a third-party to ask for proof that a POA is valid; however, once that proof has been provided the POA must be honored.
- The third-party may claim the POA is “expired.” A third party may claim the POA was executed too long ago. Some banks have created internal policies to refuse to accept a POA if it is more than five years old. In reality, however, a POA never “expires.” It could have a termination date included in the POA or it could have been revoked, but it does not expire nor can one be “stale.”
- The third-party may require a POA to be executed using their own form. There are some third- parties, such as banks, that often want a POA to be executed on their own form. Legally, a third-party cannot require a POA to be executed on their own form; however, if it is possible to get the Principal to do so, it is often easier to simply comply than to challenge the third-party.
If you find yourself attempting to use a Power of Attorney but a third-party is refusing to accept your authority under that POA, ask them what they require in order to accept your authority. If it is easy to comply, consider doing so. If not, consult with an experienced estate planning attorney right away to discuss your legal options.
Contact Overland Park Estate Planning Attorneys
For additional information, please join us for an upcoming FREE seminar. If you have additional questions or concerns about how to handle a third party’s refusal of an Agent’s power of attorney, contact the experienced Overland Park estate planning attorneys at Parman & Easterday by calling 405-843-6100 to schedule your appointment today.