In Parts I and II of this article we discussed three misconceptions we often encounter with respect to the creation of general powers of attorney under California law. These misconceptions related to the termination of a power of attorney, whether your agent is able to conduct trustee functions on your behalf, and if your power of attorney only becomes effective if you become incapacitated. A final misconception often encountered is that your power of attorney will be honored by your financial institution quickly, without hesitation or delay. This misconception probably arises because someone who has been designated to serve as an agent under a principal’s power of attorney believes that he or she can provide such power to a financial institution and immediately (that is, within a sit down session with the banker) take over the principal’s account(s).
Financial institutions, such as banks and credit unions, consider it a significant move to have an agent designated under a power of attorney named on a principal’s accounts. Doing so provides the agent with unfettered access to the principal’s account and with such access, all the money can be removed, and the account can be wiped out! This is why institutions are naturally wary of these powers, and for good reason.
So, what precautions do financial institutions take in light of these very legitimate concerns? First, institutions often label any general power of attorney created by you or your attorney as an “outside” power of attorney. As you can imagine, these outside powers are common, and each and every one an institution receives will be sent to its legal department for review. (Most institutions have their own pre-prepared power of attorney forms. We will discuss these further below.)
An outside power of attorney may include language which the institution is unfamiliar with and could authorize actions which the institution would not honor, so these powers are looked at closely. The longer, more complicated the document, the longer the review period will be. In our experience, this period is usually one or two business days.
Why not use the institution’s pre-prepared form, so as to avoid the hassle and wait to find out whether a power you (or your attorney) have prepared has been approved or not? You could do this, but you need to remember that each institution’s forms are created for only that institution (they cannot be used at any other bank, credit union, etc.) and for just a single purpose, namely, designating an agent on a specific financial account(s). Such a power could not be used, for example, to engage in a real property transaction, which is a downfall of these pre-prepared forms.
Considering that most of us have relationships with several institutions, signing a different power at each one of them would be a lot of work, and could create a mess if you ended up designating different people on different accounts. However, if immediacy is your primary concern, you (as the principal) and your desired agent could meet with a representative at an institution where you have an account and sign the institution’s pre-prepared form on-site.
We typically recommend that you create only one general power of attorney—preferably the Uniform Statutory Form Power of Attorney. Because this form is commonly used in California, institutions will have some level of familiarity with it, and a needed review of a day or two will not turn into a week. The Statutory Form is broad in the powers it grants and can be used for almost any financial or general transaction. If you are also creating (or have created) a Declaration of Trust, and you will be transferring any of your financial accounts into it, we recommend that your Declaration authorizes your granting of a power of attorney to your agent to conduct trust functions as trustee of your trust. Remember to also add to your power of attorney itself specific instructions granting your agent the power and authority to conduct on your behalf all your functions as trustee of your trust.
Consider developing a relationship with a representative(s) at the institution(s) where you have accounts. Then, if the need ever arises in the future for you to present them with your power of attorney for approval and your Declaration of Trust, if applicable, you can show the representative(s) where the pertinent sections in these documents are located. This will make it quicker and easier for the institution’s legal department to review your documents.
A power of attorney is a key element in a comprehensive estate plan. We are here to help you understand and develop such an estate plan to benefit your loved ones.
The above statements are generalizations only and are not to be taken as legal advice for the reader’s particular situation.