Jeff Fouts: “This is estate planning attorney Jeff Fouts. People oftentimes don’t give enough thought to mental incapacity issues. They just think that it will never happen to them, but it does happen to a lot of people. The reality is that people don’t simply die in their sleep like they did decades ago. Normally something else happens to them and they continue to live, but in an incapacitated state.
If you’re expecting your kids to be able to take charge of your life once you become incapacitated, you will need to make darn sure you have proper incapacity documents so that you can avoid having to go through a guardianship proceeding. One of the documents, the document, that is the most important for this is called a financial power of attorney.
Our law firm uses financial power of attorneys for clients, but we do not create plain vanilla documents. There is a big, big problem with financial power of attorneys in modern America. Here it is.
Because so many older people are becoming mentally incapacitated, children and other people are having to step in in an attempt to make decisions on their behalf. But there is a problem. Banks, financial institutions, credit unions, brokerage houses, IRA administrators, 401(k) administrators are getting very, very reluctant to honor financial power of attorney documents.
The reason these financial institutions are very reluctant to honor these incapacity documents is because families are frequently trying to sue them and hold them liable when accidents happen to the incapacitated person’s money. If an incapacitated person’s children go and have an accidents, or intentionally do something bad with the money, then someone usually tries to sue the bank.
The bank is fed up with it. They say, ‘Look, what are we doing that’s bad? All we did was attempt to help our client, our account holder, the incapacitated person. You made the mistake, not us. Stop trying to make us liable for any screw ups.’
It’s happening all across the country. It is getting so bad that banks and other financial institutions are not honoring financial power of attorneys to the degree they used to honor them. They’re not. Credit unions, financial institutions, brokerage houses, they’re just not.
It might not have happened to you that an institution doesn’t honor your financial power of attorney, but it is happening to a lot of people. It’s getting so bad that 25 percent of every state in the union, 13 states now, at least that number, have passed statutes and laws basically begging financial institutions to honor financial power of attorney documents.
To make matters even worse, most people are under the mistaken belief that institutions have to honor those documents. They don’t. They do not have to honor it just because you bring it to them and say, ‘You honor this.’ The shock to people is that when your good kids go to the bank and they expect that they’re going to get that financial power of attorney honored, they may very well be hit with the reality of life, that the bank won’t honor it.
I’ll go over why the bank doesn’t like them in another video. I’ll also go over some substitutes for financial power of attorney documents that are very valuable, and in some cases, even better. If we can ever help you in any way, let us know. Perhaps, reviewing your estate plan. Have a good day.”