Durable Powers of Attorney are important documents in a California estate plan. They are used when someone is no longer willing or able to handle their finances and want the agent named in the durable power of attorney (who is usually a close family member or friend) to take over their banking and finances.
Unfortunately, over the last few years, we have found many banks struggle to accept durable powers of attorney. When our clients tell us the bank won't accept the durable power of attorney, we contact the bank and push back. Eventually, the bank gives in and accepts the durable power of attorney. But why the fight?
We've learned that banks don't like durable powers of attorney for many reasons.
The routine bank transaction is with the account holder. When using a durable power of attorney, the agent named in the durable power of is acting on behalf of the account holder. That is not routine. It's not standard procedure. Even though it's legal. Even though the durable power of attorney is based on the California Probate Code, it's not a routine transaction.
If a bank accepts a durable power of attorney, they could be exposed to liability if the durable power of attorney agent acts badly. As they see it, there is little risk in not accepting the durable power of attorney. The worst outcome is the account holder changes banks. That is perceived as a lesser risk than giving a bad actor access to their account holder's money.
Many of today's customer-facing bank representatives are inexperienced and not well-trained. They often have never seen a durable power of attorney. It's easier for them to say no or to refer the matter to the bank's legal department. And as we have discovered, most bank legal departments don't understand durable powers of attorney.
A top bank representative recently told me that his bank's default position is to not accept durable powers of attorney. In the case at issue, his bank eventually accepted our durable power of attorney, only after we sent several emails, a letter and made many phone calls to the bank explaining why our durable power of attorney complied with California law and why the bank could be subject to damages if it did not accept the durable power of attorney. The bank eventually relented and accepted our client's durable power of attorney (which BTW was for an elderly client to authorize her niece, who was living with her and paying her bills, to have access to the account - all on the up and up).
The banker told me the bank agreed to accept the durable power of attorney because he researched our law firm and determined we knew what we were doing. He said many of the durable powers of attorney the bank sees are poorly written by attorneys who are not experienced estate planning attorneys or are DIY documents the account holder created online, neither of which the bank will trust.
Someone at the bank should be qualified to determine whether a durable power of attorney complies with California law. It should not matter who created the documents. But apparently, with that bank, which is a major US bank, that is not the case.
If you are in a situation where you need your bank to accept a durable power of attorney, be persistent. If the durable power of attorney is written correctly, the bank will have to accept it eventually. Just know it may be a fight.