Pitfalls with Parents: Financial Power of Attorney

Article By: Jasmine Sweatman, Partner, Sweatman Law FIrm

Disclaimer: This article is not meant to be taken as a guideline for dealing with all Powers of Attoneys but may be provide an interesting example of what people in similar situations may be able to expect.

Alice Rixson and Marguerite Thomas have a lot in common. They went to high school in the same town and then reconnected on line and discovered that they both hold Power of Attorney (POA) for their elderly mothers.

A POA is a legal document that appoints someone to make financial and/or personal care decisions for you. It is most commonly activated when those who make the appointments are no longer mentally capable of making decisions. But then, since a POA for property can still be used when you are capable why is it so difficult to implement? When your elderly parent is mentally capable, but has difficulty hearing or seeing and with mobility issues, why is it so complicated?

This was the situation facing both Rixson and Thomas. Thomas relates that her first challenge occurred after her mother suffered an injury and had to be moved to a care facility. Thomas only wanted to file a change of address on an investment account. Living one hour away she called the agent who required Thomas’ mother to confirm the request. Not an unreasonable position given the request was by phone; however, how could the bank (presumably doing this to ensure Thomas’s authority) really confirm this by phone? Yet when Thomas tried to cash a cheque for her mother the bank would only allow her to make a deposit – no cash.

Armed with her elderly mother’s POA, Rixson visited a local bank on the instructions of her mother to redeem her RIF. Rixson was trying to help mother who is blind, physically disabled, suffers from numerous ailments with English not her first language. The bank asked for the reason, asked for “proof” of her mother’s permission and required the POA to be “cleared” by the bank’s legal department. It took 38 days, many letters and phone calls, before the funds were released.

The problems with the use of POAs for a competent but frail, elderly person is not new to Jasmine Sweatman managing partner of Sweatman Law Firm. “The Power of Attorney document is an often misunderstood document. Institutions are naturally cautious and often have ‘due diligence’ requirements, but especially where there are no ‘red flags’, these procedures can be frustrating and overbearing.”

Sweatman advises that normally a third party will require to see the original or a “notarial” copy of the original (a lawyer prepared certified photocopy of the original). This should be sufficient. There should not be any justification to going behind the document or doing more. What is often forgotten in these situations is that the power of attorney for property is valid the moment it is signed and that the person creating the document does not need to be mentally incapable before the appointed person can act under it. Financial institution conscious of their own liability and, at times putting this concern first, will “disregard” this legal state and require proof of permission before agreeing to the request presented by the named attorney.

How could Rixson and Thomas have taken care of their mothers’ affairs in a simpler and more pleasant way? Sweatman advises: Plan and be prepared for when the POA needs to be used. Get to know the personnel at your mother’s bank. Get to know her advisors – before health issues get in the way be introduced to these key personnel and ask that the POA be “approved” before it is needed and filed with the bank.

Another potential solution clients ask about, says Sweatman, is putting assets into joint names. With a small account with emergency cash this is a great idea. Funds then can be accessed as needed. However, it is not for every situation and even here banks are conscious of potential misuse and have incorporated into their account opening documentation the “right” refuse to carry out transactions unless the first account holder gives permission.

As Sweatman says, the law is this area is a “big stick”. It is black or white (you are either capable or not legally) while the issue of capacity is grey. There is no real alternative or a half way point between being declared legally incompetent (as defined by statute) and being competent but needing assistance – other than being prepared. Power of attorney documents are one very powerful tool in the arsenal of remedies in substitute decision making but can often be fraught when trying to use them practically.

By:

M. Jasmine Sweatman

Alice Rixson,

and

Marguerite Thomas


Related