Comparing a Power of Attorney to Dynamite

In Wilson Rawl's Where the Red Fern Grows, Billy says of his small hunting dog Little Ann, "Dynamite comes in little packages." In my opinion, financial powers of attorney are as dangerous as dynamite in terms of their potential consequences for ill. Inadequate financial powers of attorney are at the heart of numerous expensive and painful probate cases. I think financial powers of attorney are as important as revocable trusts and deserve as much attention.
In an article written by Linda S. Whitton, titled "Durable Powers as an Alternative to Guardianship: Lessons We Have Learned" (37 Stetson L.Rev. 2007), Ms. Whitton states there are three things to understand about durable powers of attorney as used as an alternative to guardianship.

1. A Power of Attorney is Only as Effective as the Willingness of Third Parties to Accept It.



2. A Power of Attorney is Only as Protective as the Agent is Trustworthy.



3. A Power of Attorney will Not Prevent Family Power Struggles over the Principal's Assets.

In this blog, I will address the first point made by Ms. Whitton.

The first point is spot on. If a third party refuses to accept a financial power of attorney, then the power of attorney is not very effective.

A word about this first lesson in terms of Utah law. As of the date of this entry, there is no Utah statute or Utah judicial decision that requires a third parto to accept a financial power of attorney or that offers any statutory redress against a third party for unreasonably refusing to accept a financial power of attorney. Utah statutory law governing financial powers of attorney is quite basic, essentially recognizing and authorizing the use of financial powers of attorney, but not much more. (U.C.A. 75-5-501 to 504.)

Therefore, in Utah, if a client is incapacitated and if third parties will not accept a durable financial power of attorney signed by the client, then the named agent has only two options: the agent can sue the third party to force acceptance of the power of attorney or seek a conservatorship.

So the question is, what can be done in Utah to encourage third parties to accept financial powers of attorney?

I have asked the legal departments of Zions Bank, Wells Fargo, U.S. Bank, Key Bank, and Mountain America Credit Union what they are looking for in financial powers of attorney that encourage them to acknowledge the agent's authority to access the principal's accounts. The responses are summed up as follows:

1. First, are the formalities honored? Is the document signed and notarized? (A few of the legal departments said they would be impressed if the principal's signature was witnessed, even though there is no statute requiring witness attestation.)



2. What is the liability of the third party in accepting or rejecting the power of attorney? The less liable these third parties are, the more likely they said they would be in accepting the agent's authority under the power of attorney.



3. How recent and well-organized is the document? The more "fresh" and readable the power of attorney is, the more likely these third parties will accept it.

With these ideas in mind, I suggest that financial powers of attorney include language at the very beginning of the document that releases third parties from liability for accepting the agent's representatives regarding the validity of the power of attorney (and places liability for abusing the principal or the power of attorney squarely on the agent). I suggest this language include clear language as to what third parties are and are not obligated to do in accepting a financial power of attorney.

Check out our website to learn more about financial powers of attorney.

Craig E. Hughes