The Bank and the Broker Won

 

Two Agents is One Too Many

“The bank and the broker won’t accept our power of attorney,” came the report from my client. This is the exact opposite of what one would want and expect. Unfortunately, it is happening more frequently. Moreover, it happens most often when two or more people are named to serve as co-agents under a financial power of attorney. If you have named co-agents, what should you do? Let’s consider the challenges and the options.

My client wanted a power of attorney that allowed both of her daughters to act on her behalf. She worried that if only one daughter were given the power the other would be insulted. Some clients worry that one child or agent will need some assistance to perform tasks properly. Whether to avoid hurt feelings or to guarantee proper performance, many clients have named co-agents in their powers of attorney.

Powers of attorney documents are designed precisely to provide access to finances if you become ill or incapacitated. Common sense and cautious planning say that naming co-agents is a sound choice. Banks and brokerage houses say otherwise. They fear that dissension between the agents will result in liability for the financial institution. And their fear has grown in recent years. Nothing about naming co-agents is contrary to the law. This issue is solely one of policy by banks and brokerage houses.

In one’s hour of need, when bills must be paid or investments need to be adjusted, you want the power of attorney to be accepted promptly. Consider the client who executed the power of attorney with co-agents and is now ill. The power of attorney is rejected by their bank and a new one has to be executed. But they might not be able to execute a revised document.

One impediment to signing a new document is the ability to execute a document in front of witnesses and a notary. Many nursing homes and institutions prohibit the staff from serving as witnesses or notaries for document signing purposes. Family members should not serve as witnesses as this can imperil the validity of the document. Presenting a notary and two impartial witnesses at the bed of an ill person may be impractical, especially during a pandemic.

The other major impediment may be poor health, whether it is physical or mental disability. Simply put, you might not be able to execute a new power of attorney because you are too ill. In the worst-case scenario, the family members would file a petition for guardianship with the local courts to obtain the necessary power to pay bills and monitor investments. The downside of guardianship is the time, expense, and burden. The process can take months. The cost is thousands of dollars in attorney fees. And the family will be burdened with being answerable to a Court.

I now advise that you select only one agent to serve. Making the choice of a single agent can be difficult. How should you select the one and only agent to serve under your power of attorney? Consider these three factors. 1. Geographic proximity to the client might be very important. We have learned from this pandemic that an agent who is unable to travel may be also unable to get access to the client’s assets. 2. Education or work experience in a profession that supports skillful financial management. The agent should be comfortable with financial records and investment choices. 3. Flexible work or family life that permits the agent to devote time and energy to your needs. The agent has to be physically available from time to time.

A durable financial power of attorney can always have an alternate or successor agent if the first agent appointed is unable or unwilling to serve. Just appoint the successors to serve one at a time.

One other alternative is the revocable living trust. By transferring assets to a trust, the named successor trustee can more easily step into the role of bill payer and asset manager. In fact, the aversion to co-agents under powers of attorney does not seem to have carried over to trusts where co-trustees are more readily accepted. Therefore, by preparing and executing a revocable living trust to own one’s assets, a client may be able to appoint co-trustees who will have the ability to use and manage the trust assets, even if invested in banks and brokerage houses.

Please check your power of attorney document if you have one. Have you named co-agents? If so, a revision may be critically important to your fiscal and physical health should you become ill or incapacitated. Now is the time to act.

Evan J. Krame