Jeff Fouts: “This is Jeff Fouts, estate planning attorney. There is a big problem in the estate planning world that’s going underneath the radar, and for a lot of people, like you and your family, it could have very bad ramifications. The problem is that is that a lot of people – financial institutions like banks, credit unions, brokerage houses, IRA administrators, etc. — are not honoring financial power of attorneys.
People don’t realize this is a problem because they are under the mistaken point of view that financial institutions — banks, credit unions, IRA administrators, brokerage houses, etc. — have to honor their financial power of attorney documents. That’s just not true. They do not have to honor them. And nowadays they’re not honoring them.
Banks and other institutions are using lots of different excuses not to honor financial power of attorney documents. What are the excuses they are using? Well, some of those excuses are, ‘Oh, your document is too old.’
What do you mean when they say the document is too old? Financial power of attorneys prepared for estate planning normally don’t have an expiration date, but banks don’t care. Financial institutions don’t care. Once your document gets to be three, four, especially five years old, the odds of the institution not honoring it go through the roof.
What else? What other reason do they give to not honor your documents. They say, ‘We only accept the original document, not a copy.’ What are you supposed to do when every institute demands an original document? Once you your one original document to the first institution you are in trouble.
Now when the next financial institution demands an original, and won’t accept a copy, you’re in trouble. Why? Because the person who signed the document is now mentally incapacitated. They are no longer legally competent to sign any other legal documents. Once your only original is gone, it’s gone.
I know of an investment brokerage house. I will not name any names, but they’re very famous. I know you’ve heard of them. They said to a client of mine who had been helping an incapacitated relative of his, ‘We will let you make decision for your uncle, but we must have an original of the financial power of attorney document.’ This very well known brokerage firm also said, ‘We will also need a document signed by your uncle which says it is still his current desire to have the financial power of attorney document honored.’
Now let’s get this straight. The man is incapacitated. They want the original financial power of attorney document! And they want him to sign another document saying it’s still his wishes to have that document honored! He’s incapacitated. He can’t sign any document.
That is a very, very good illustration that these institutions do not want to honor your financial power of attorney document. Why? They have too much liability. That type of document is what is called an ‘agency relationship’ document, and financial institutions are very leery of them. The fact is that it is extremely dangerous for you and your family to rely on an ‘old’ financial power of attorney to help deal with your incapacity. Because it may not be honored.
You only have three alternatives. You only have three alternatives. The first is, once every three to five years, you have to come in to our offices and get your financial power of attorney redone. The second option is that you choose to not redo your financial power of attorney every three to five years, and you become incapacitated.
Then your family will be forced to go to the Probate Court and begin a Guardianship proceeding, which is expensive and time consuming. I recommend you avoid this option like the plague.
The third alternative is to have a specialized, revocable living trust. We’ll talk about that at the next segment. If we can ever help you in any way, give us a call. Thank you.”
- Updating Your Financial Power of Attorney When the Bank Won’t Listen - May 3, 2021
- Contesting a Will or Challenging Revocable Trusts - April 26, 2021
- Estate Planning Updates: Review & Update Your Estate Plan - April 20, 2021