A power of attorney is a very useful document, but agents often run into obstacles when they attempt to exercise the powers at a bank, credit union, investment brokerage, insurance company, or medical provider. The person who signs a power of attorney giving another person authority over his or her affairs is the principal. The person granted authority by the principal is the attorney-in-fact or, more commonly, agent. The banks and other institutions where the agent presents the power of attorney are called third parties. Third parties may not recognize the power of attorney as valid, they may require a medallion signature guarantee in addition to notarization, or they may view the power of attorney as stale-dated. A knowledgeable estate-planning attorney will know how to address these problems.
The most common problem agents run into when doing the principal’s business with a power of attorney is that a third party will refuse to recognize the power of attorney as valid. This is understandable. A bank officer or insurance agent is not a legal expert. If the agent is allowed to withdraw money or take other financial action, the third party may have a problem with its customer if the agent is not acting properly. Refusing to allow the agent to handle the business can seem safer, particularly if the third party does not give the agent a written refusal. It is easy to say, “No.”
A letter from an attorney may explain that the attorney has reviewed the document and determined that it is properly executed and conveys the powers the agent intends to exercise. This will usually persuade the third party to recognize the agent’s authority. This is especially effective if the attorney drafted the power of attorney and was present when it was executed. Then the attorney can attest to the document’s validity.
When an agent wants to transfer stock, cash in savings bonds, or perform certain other financial transactions, the third party may demand a medallion signature guarantee. This is confusing, particularly when not dealing face-to-face with the third party. The third party is not asking that the principal’s signature be guaranteed. This might be impossible when the principal is unavailable or incapacitated. The third party wants the agent’s signature guaranteed. This is easy. The agent signs a letter of instruction explaining what the agent wants the third party to do – sell stock, for example – in front of a bank officer who will put a medallion guarantee stamp on the document.
When an agent wants to sell stock, the power of attorney cannot be more than 30 days old. A power of attorney that is not current may be “refreshed” using a “Certificate of Continued Validity.” The agent or an attorney will sign a document attesting that the power of attorney was validly executed, that it has not been revoked, that the copy of the power of attorney being submitted is a true and correct copy of the original, and that the principal is still living. The signature on the document must be medallion-guaranteed. The certificate is then submitted with the copy of the power of attorney and the letter of instruction.
If a power of attorney was properly drafted and executed and the agent is acting properly, there should be no reason for a third party to refuse to allow the agent to act. Still, there can be apprehension in the mind of a third party. They may know their customer, but not the agent. Fortunately, reluctance on the part of a third party can usually be overcome using the methods described above. However, it is important for the agent to be respectful and not antagonize the third party on the first contact. Understanding the third party’s concern and addressing that concern will be extremely helpful in gaining the third party’s trust and cooperation.
John B. Payne, Attorney
Garrison LawHouse, PC
Dearborn, Michigan 313.563.4900
Pittsburgh, Pennsylvania 800.220.7200
law-business.com ©2014 John B. Payne, Attorney