You signed a durable power of attorney, named someone you trust and filed it with your important documents. You assumed that, if something happened, your family could step in and manage your finances.
Then a crisis occurs. You suffer a stroke, accident or illness and can no longer handle your financial affairs. Your adult child walks into the bank with your power of attorney, ready to pay your mortgage, utilities, medical expenses and other bills. The bank says no.
Unfortunately, this happens more often than families expect. A power of attorney may be legally valid, yet a financial institution may hesitate to accept it, send it to its legal department for review, question its age or request additional documentation. Meanwhile, the bills don’t stop.
Why would a bank question a power of attorney?
Financial institutions must protect their customers from fraud and unauthorized transactions. When an account holder is incapacitated, the bank may have concerns about whether an older power of attorney is still valid or whether the person presenting it has authority to act. That is why signing the document is only one part of planning.
While you are healthy and capable, it is helpful to ask your financial institutions about their procedures for powers of attorney. Some may have additional requirements or their own forms. Addressing these issues ahead of time can reduce delays during an emergency.
Estate planning documents should also be reviewed periodically. Although an older power of attorney may still be legally valid, its age can sometimes create additional questions. It should also contain appropriate durability language so your agent’s authority continues if you become incapacitated.
A trust provides another layer of protection.
A power of attorney is essential, but it should not be expected to do everything. When appropriate assets are properly titled in a revocable living trust, a successor trustee can generally step in if the original trustee becomes incapacitated. The successor trustee then has authority to manage the assets owned by the trust according to its terms.
This is why funding a trust is just as important as creating one. A signed trust sitting safely in a binder cannot control an asset that was never transferred into it.
A power of attorney remains important for certain assets and financial matters outside the trust. An advance healthcare directive serves another purpose by identifying who can make health care decisions when you cannot. Each document has a different job. Together, they create a more complete plan.
Will your plan actually work?
Estate planning should not end when the documents are signed. A plan should be reviewed periodically and after significant changes involving family, finances, property or financial institutions.
Ask yourself: Is my power of attorney current? Does my bank have special requirements? Are the appropriate assets titled in my trust? Does my successor trustee know what to do?
The goal isn’t simply to have documents stored safely in a binder. The goal is to have a plan your family can actually use when they need it most.
Send your questions to ccolan@colanlegal.com and use “Alpine Mountaineer estate planning question” as the subject. We’ll answer your questions in our upcoming issues.This article is provided by your local estate planning attorney, Corina Colan. The Law Office of Corina I. Colan / (909) 265-3315 / www.colanlegal.com
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