Can a Third-Party Refuse to Honor a Power of Attorney?
Well-developed estate plans often include a number of documents that collectively serve to provide a person with the oversight he/she wants of his/her property, as well as to ensure the individual’s wishes are followed in the event he/she becomes incapacitated. Powers of attorney are commonly used in estate plans, and typically authorize a third party to make financial and/or personal decisions in the event of physical or mental conditions that prevent someone from handling his/her own affairs. Giving authority to another to act on one’s behalf is a big responsibility, and should be crafted with care and an intention to pick a person who has the knowledge and experience to best fill the role. However, failing to address this possibility can leave loved ones with complicated and contentious issues, especially if individuals cannot agree. Durable powers of attorney are specifically designed to handle decision-making issues in the event of incapacity, and differ from general powers of attorney, which are immediately effective upon creation and become invalid when the grantor no longer has the capacity to consent. When someone takes the time to create a plan to address this possibility, the thought that a third party may refuse to honor it probably does not enter one’s mind. However, there are situations in which a third party may legitimately refuse to recognize the document, and a discussion of these circumstances, as well as an overview of the function of powers of attorney will follow below.
The Purpose of Powers of Attorney
As noted above, the general purpose of a power of attorney is to authorize another person to act on one’s behalf. Specifically, the principal (grantor of authority) gives authority to an agent to act on his/her behalf in legal matters. The extent of the authority depends upon the type of power of attorney executed and the terms contained within it. A general power of attorney has close to full authority to act on the principal’s behalf in a large range of legal situations, including withdrawing funds or entering into a contract in the principal’s name. A limited or special power of attorney extends only the authority directly listed in the agreement, such as for medical treatment. A durable power of attorney overcomes the traditional termination of these agreements upon the death or incapacity of the principal and continues to operate or becomes effective when incapacity is established.
Why They Could Be Refused
Generally, exercising a power of attorney simply requires presenting an original or certified copy. However, it is possible to experience resistance, particularly from financial entities, and some may refuse to honor the power of attorney. Some of the most common reasons a third party will refuse to recognize a power of attorney include:
- Staleness – Business entities are wary of honoring agreements that are years or decades old because of the problems that can arise with other family members or interested parties. While this is not a legal basis, to avoid a frustrating fight, it is best to ask the principal to update the document every few years so it stays current.
- Improper Form – Some companies, particularly banks and other financial institutions, have their own power of attorney forms they require customers to use. Similar to the first reason, this argument does not reflect the law, because they are required to accept any valid power of attorney, but if the principal is available, it is best to use it and avoid drawn out dispute.
- Proof of Incapacity – Durable powers of attorney become active when the principal is incapacitated, which can lead the third party to ask for proof the principal is incapable of acting on his/her own behalf. To resolve this objection, the agent will need a letter from a physician that includes a finding of incapacity.
Seek Legal Assistance from a Florida Estate Planning Attorney
Executing a sound and effective power of attorney is more than filling out a pre-printed form, and should be done with the advice of an experienced estate planning attorney. William Rambaum has decades of experience helping Florida seniors and their families put together plans reinforce a long-lasting legacy. Contact the Oldsmar estate planning law firm today at (727) 781-5357 to schedule an appointment.