Most people think of the power of attorney as a foolproof legal document that enables them to handle the finances of a loved one who does not have, or soon may not have, the ability to make their own financial or legal decisions. But many people find out the hard way that a power of attorney is not an infallible document, and many banks or other financial institutions have strict rules about how they can or cannot be used. As this recent article from the Wall Street Journal shows, being aware of some of these regulations can help you avoid difficult situations when it comes to dealing with your loved one’s finances.
Many banks have grown wary of accepting a power of attorney because the documents can be abused by children or other caregivers who are trying to take advantage of or steal from a family member. But these restrictions can leave honest families in the lurch, especially when the transfer of finances is necessary in order to pay for a loved one’s medical care, housing or other necessities. Some people have taken legal action to force banks to accept these documents, and a growing number of states are passing legislation that makes it harder for financial institutions to refuse them.
The best way to avoid these pitfalls is to be knowledgeable and prepared before you need to use a power of attorney. Meet with your financial adviser to find out more about the procedures and requirements of your bank and your loved one’s bank. Some banks require a separate power of attorney to be drafted by their own legal team. Others ask for a notarized affidavit or signature guarantee along with the power of attorney document. By asking these questions ahead of time, you can ensure you have all necessary documentation in order before you need to take control of your loved one’s finances.
Assisting a family member who cannot make their own financial decisions is often a stressful, difficult time. Proper planning with your financial team can help ensure an easier transition for both you and your loved one.
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