A durable power of attorney (POA) allows the person creating the document, called the "principal," to name a trusted agent who can act on his behalf in almost any situation. It is very frustrating, then, when a bank financial institution refuses to honor a POA, thus eliminating the benefits and convenience that the principal had desired when it was given. I recently had just such an experience with Vanguard. Vanguard refused to honor a POA to me by my own mother, insisting that my mother sign their form, even though the POA had immediate effect when it was signed and was not conditioned on incapacity (this is normal and typical). Vanguard's behavior is illegal in many states, including California (where this POA originated), Florida, Idaho, Indiana, North Carolina, Texas, Washington and probably others (this list to be updated as I discover other state statutes).
In a case in Florida, Bank of America rebuffed an agent's request that funds be withdrawn from the principal's account. The agent fought back in court and won a $64,000 judgment against the bank.
Clarence Smith, Sr., named his son, Clarence Smith, Jr., as his agent under a POA. When his father no longer wanted to manage his own finances, he asked Clarence Jr. to step in as his agent. [This was my exact situation.] Clarence Jr. reviewed his father's account activity and became suspicious about some withdrawals from a bank account that Clarence Sr. owned jointly with a friend from his retirement community.Acting as his father's agent under the POA, Clarence Jr., asked Bank of America to transfer $65,000 from the account into a new account that listed only his father as the owner. Before doing so, Bank of America contacted the other person named on the account. When she told the bank that she did not want the funds withdrawn and also accused Clarence Jr. of stealing his father's money, Bank of America refused to honor Clarence Jr.'s request. The other account owner then withdrew all of the funds from the account and placed them into her own account, effectively preventing Clarence Sr. from accessing his own money. Clarence Sr. died several weeks later.
Clarence Jr. sued Bank of America under the Florida law that imposes penalties on financial institutions that refuse to honor reasonable requests from agents named in properly executed POAs. In November 2009, after a week-long trial, a Florida jury returned a verdict against the bank and awarded $64,142 to Clarence Sr.'s estate. The jury found that Bank of America had not acted reasonably when it rejected Clarence Jr.'s request, even though the joint owner of the bank account had not agreed to the release of the funds.
In a case in Indiana, Ameriprise refused to honor a POA and insisted that the principal, who had been diagnosed with dementia for more than 10 years, sign Ameriprise's standard POA form. This was not possible, of course. The attorney in fact hired an attorney, who tried to talk sense into Ameriprise but to no avail. They we were left with no option but to file suit citing Indiana's “refusal to honor POA” statute. This got the attention of Ameriprise's legal department and they caved quickly after that, but not until the poor client had to incur the time and expense of commencing litigation, having the summons and complaint served, etc.
Certain financial institutions are well known in the estate planning legal community as being "difficult" and "unfriendly" when it comes to estate planning. The don't honor POAs when they should, they refuse to retitle existing bank accounts into the names of trusts, they refuse to allow a trust to hold an account in their institution at all, they won't lend to trusts, and so on. Experienced estate planning attorneys know who they are and can steer you to financial institutions that have experience dealing with powers of attorney and trusts and can make your life much easier.