What happens when a bank refuses to honor a well-drafted Power of Attorney?  I recently received a call from a daughter of a client.  She was sitting at a desk a a Bank of America, with a copy of her mother’s Power of Attorney.  I had met with both the mother and daughter recently and the mother had made it very clear that she wanted her daughter to be able to have access to her accounts and make sure that her bills were paid.

Bank of America was refusing to honor the Power of Attorney.  The Bank did not question that the document was properly drafted.  The bank did not question that the daughter was the properly appointed Agent for her Mom.  Finally, the bank did not question whether the Power of Attorney had been revoked.  Instead, the bank put up arbitrary and capricious barriers to the use of the Power of Attorney.

The local branch sent a copy of the Power of Attorney to the bank’s “legal department.”  The “legal department” told them that the needed a Notarized statement from a doctor stating that the mother was incapacitated before the daughter could use the Power of Attorney.  I put the words legal department in quotes because, the bank will never let you talk to the “legal department.”  When I called the bank to explain that there was no reason for a Notarized statement from the doctor, the local branch of the bank blamed the bank’s “legal department.”  However, the bank will not allow them to give out a name, phone number, email address, fax, or any other way to communicate with the “legal department.”  I was told that they could give me a mailing address and I could write a letter.  However, they could not tell me who to direct the letter to, and therefore the letter would never actually make it to the person from the “legal department” who was imposing this ridiculous requirement.

To understand the issue, you must understand that some Powers of Attorney can only be used after one or two doctors declare the person to be incompetent.  These are called “springing” powers.  Other Powers of Attorney are designed to be effective immediately upon signing the document.   Even the springing powers usually do not require the doctor’s statement be Notarized.  The way to tell what is needed is simply to read the document.  The document defines the requirements.

The document in question was effective immediately upon signing.  There was no need for any type of doctor’s statement.  This could have easily been explained over the phone.

After I had a very candid conversation with the bank’s manager, and I made a call to a contact I had at the corporate offices, we got the bank to honor the Power of Attorney without any extraneous requirements.   In this case, the bank’s lack of knowledge and lack of willingness to meet their customer’s needs, lead to a great deal of hassle and inconvenience for the family.  In the following case, the bank (also Bank of America) cost a family $64,000.00.

From Elder Law Answers:

Bank Pays Price for Refusing to Honor Request Made Under a Power of Attorney

A durable power of attorney (POA) allows the person creating the document, called the “principal,” to name a trusted agent who can act on his behalf in almost any situation. But because of the risk of abuse, many banks will scrutinize a POA carefully before allowing the agent to act on the principal’s behalf, and often a bank will refuse to honor a POA. In a recent Florida case, Bank of America rebuffed an agent’s request that funds be withdrawn from the principal’s account. The agent fought back in court and just won a $64,000 judgment against the bank.

Clarence Smith, Sr., named his son, Clarence Smith, Jr., as his agent under a POA. When his father no longer wanted to manage his own finances, he asked Clarence Jr. to step in as his agent. Clarence Jr. reviewed his father’s account activity and became suspicious about some withdrawals from a bank account that Clarence Sr. owned jointly with a friend from his retirement community.

Acting as his father’s agent under the POA, Clarence Jr., asked Bank of America to transfer $65,000 from the account into a new account that listed only his father as the owner. Before doing so, Bank of America contacted the other person named on the account. When she told the bank that she did not want the funds withdrawn and also accused Clarence Jr. of stealing his father’s money, Bank of America refused to honor Clarence Jr.’s request. The other account owner then withdrew all of the funds from the account and placed them into her own account, effectively preventing Clarence Sr. from accessing his own money. Clarence Sr. died several weeks later.

Clarence Jr. sued Bank of America under a Florida law that imposes penalties on financial institutions that refuse to honor reasonable requests from agents named in properly executed POAs. In November 2009, after a week-long trial, a Florida jury returned a verdict against the bank and awarded $64,142 to Clarence Sr.’s estate. The jury found that Bank of America had not acted reasonably when it rejected Clarence Jr.’s request, even though the joint owner of the bank account had not agreed to the release of the funds.

Bank of America plans to appeal. “We believe that neither the facts nor the law support the verdict,” said spokeswoman Shirley Norton.

While this case clearly illustrates the conflicts that can arise through the use of a POA, it also raises the issue of the proper use of joint bank accounts in estate planning. Under most state laws, when two or more people own “joint” bank accounts, each of them has the right to the entire account, no matter whose money is actually in the account. While joint accounts can often be useful, sometimes, as in this case, joint owners or their agents can disagree about the use of funds in the accounts. When that happens, the party who makes it to the bank first often wins. A qualified elder law attorney can explain the pros and cons of joint ownership, can draft an effective POA, and can assist family members when disputes arise.

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