When preparing an estate plan, attorneys typically advise the client that he or she needs a Power of Attorney (POA) for property. Sometimes referred to as a Durable Power of Attorney, a Power of Attorney for property, is a document that is designed to allow a person other than the Principal (the person signing the document) to make financial decisions for them. In other words, it is a series of pieces of paper that tell the world who is allowed to manage your money, sell your property, access your accounts.
Powers of Attorney are handy dandy documents but are not without pitfalls. For example, let’s say my husband and I are buying a new house, and he cannot attend the closing. If I have his Power of Attorney for property, I can legally sign his documents for him.
The person granting the Power of Attorney must be over age 18, of legal capacity, and must know what they are doing. Often, children of aging parents call to ask if I can prepare a POA for the parent to allow the child to access accounts. I can unless the parent lacks capacity or cannot carefully consider the matter without pressure or undue influence, in which Guardianship is the only answer.
A POA is not without risk. It is essential that the person named as your Agent is trustworthy, nor is it without limitation. Even assuming that you choose your Agent wisely, the Power of Attorney for property form alone does not make an estate plan. By definition the form will expire at the death of the Principal leaving probate as the required next step.
However (there’s always a however in the law) acceptance of the form is not guaranteed. Under Illinois law, the POA for property should be accepted without the authentication of the Principal. Unfortunately, large banks do not seem to accept that this is Illinois law. Let me tell you a story. An aging client, let’s call him Bill, named a friend, Sue, as his Agent under a Power of Attorney for property. Bill had capacity, intent, and a plan in place (my favorite kind of client). Bill then went to his summer home is far northern Wisconsin with Sue where he became ill. He could not travel and could not leave his local doctor. Money started to become an issue. Sue needed to access Bill’s bank accounts to pay his increasing medical costs. Sue sent a copy of the Power of Attorney to the Bill’s bank, but the bank refused her access to the accounts, insisting instead that Bill present the form in person. I explained that he was very sick and could not travel, but that I drafted the POA form, witnessed his signature, could provide an affidavit to its validity and would certify that Sue was indeed Sue. The bank told me they were sorry, but they could not accept the form under their “policy” without Bill coming into a branch office. The nearest branch office was 70 miles from his vacation home.
Despite the fact that this requirement was in direct contravention to Illinois law, the bank would not budge. Bill and Sue could have taken them to court and like David and Goliath, I really think we would likely have won. But the fact of the matter is that the cost of litigation was not worth the effort. Bill picked a “good day” and made his way to the nearest branch office to sign their form in front of their witnesses.
So, what is the moral of this story? You cannot rely on a Power of Attorney for property alone as a method for accessing funds on behalf of another person. There are no magic wands. Yes, a Power of Attorney for property is a handy dandy start, but do not assume it will do everything you want it to do. Use one as part of a carefully constructed plan and make sure your assets are aligned with the plan.