Last week’s post again addressed the use of powers of attorney and specifically the problem of encountering resistance by a financial institution. As I explained, many financial institutions prefer that customers sign their own form of power of attorney and do so in front of one of their employees. This is for their protection but complying with their request isn’t always possible.
Many of our elderly clients are unable to travel so cannot make the trip. Sometimes they can no longer even get on the phone. So how does one counter a bank, for example, that says they need Mom to come to the branch to sign a power of attorney because their legal department questions the validity of the one she signed a few years ago.
It helps to know a little bit about what the law says about powers of attorney. Firstly, New Jersey law says that a power of attorney must be in writing. It must be signed by the principal and acknowledged before a notary public. There is also a specific section that covers banking transactions. If the power of attorney gives the agent the power to conduct banking transactions and makes reference to that section then those powers contained in the statute are included whether detailed in the document or not.
This also can make problems with banks much easier to address. That’s because another section provides that banks must accept and rely on a power of attorney that conforms to the statute. They cannot categorically insist on a power of attorney executed on their own form.
Of course, if the bank has received notice that the principal has died or revoked the POA then they can and should refuse to accept the agent’s request to take action. The same applies if the bank believes the principal’s signature is not genuine. If the bank does not have actual knowledge but believes in good faith that any of these situations is present or that the principal was under a disability when he/she executed the document, then it can also refuse to honor the agent’s request to accept the POA.
A bank may also refuse to rely on a power of attorney first presented to it more than 10 years after it was signed by the principal unless the agent is either the principal’s spouse, parent or descendant of a parent. A descendant of the principal’s parent would include his/her children and grandchildren as well as siblings, nieces and nephews.
That’s what the law says. In practice, however, I have found too many banks that go too far. They reject powers of attorney without any basis and either with disregard or ignorance of the law. The law says they must act “in good faith” but what does that really mean?
We’ll get to that question next week so stay tuned.