A Continuing Power of Attorney for Property (CPOA) is a legal document that gives someone (an ‘Attorney’) the right and the responsibility to manage your money, your finances, your property. Aging parents who create Powers of Attorney for Property often designate one or more of their adult children to be their Attorney. Even with a legal Power of Attorney, it’s important to understand the power of the banks and how to plan for that and work with them. With planning, there are ways to get the Power of Attorney recognized at the bank.
Can a bank refuse a Continuing Power of Attorney for Property (CPOA)?
Yes, they can! If you are you going to manage your parents’ finances in the future, don’t be seduced by a false sense of power the ironically named Power of Attorney gives you. It doesn’t matter if your POA was drawn up by the best lawyer in town—the banks don’t may not trust you and you need to plan for that.
They aren’t just throwing their power around because they can. Banks have a responsibility to protect people’s finances. Most of us have heard or read stories about fraud, theft of seniors’ savings, and financial abuse (with the equally disturbing fact that family members are usually the culprit).
It is an especially tough job for banks these days. With online banking and banking machines, you and your parents may be unknown to them outside of an online account or two.
Because of this unfamiliarity, sometimes the pendulum swings too far and the bank refuses to recognize legitimate Powers of Attorney.
Why banks reject a Power of Attorney
Banks can refuse to accept a Power of Attorney because it is :
- lacks clarity
- doesn’t conform to the bank’s internal policies
If you think that the above reasons are rather vague, I couldn’t agree more. I have had clients’ POA refused because:
- They had never met the son who had the POA
- The POA was over 10 years old
- The person with the account didn’t arrange to sign the bank’s own internal papers
- The parent was not physically able to go to the bank to verify they gave their daughter a POA
- A sibling called the bank and said this was a case of financial abuse
All of the POAs presented to the bank were legitimate.
Save the ‘Do-it-yourself’ approach for less significant projects
While you don’t always need a lawyer to draw up a POA (there are free kits available you can complete without a lawyer), I have always advised the use of a lawyer. In my experience, banks are even more suspicious with do-it-yourself POAs, even though they are still a legal document. It is also advisable to have a lawyer complete your POA if there is even a hint of conflict between siblings (and this is no time to be naive or sentimental).
When the banks don’t recognize a Power of Attorney
This isn’t fear-mongering or a tirade against the banks. I have simply had too many experiences with daughters and sons who have had a legitimate POA denied by the bank. You can imagine the stress involved under this situation. The banks can freeze accounts, in order to investigate “suspicious activity”. This can even make it difficult to pay bills (yes you read that right, difficult to put money into the account and pay bills).
If suspicious, the banks can ask for a capacity assessment to be completed or a letter from the family doctor confirming that your parent is capable. While inconvenient and sometimes costly, this is not always possible, as sons and daughters are involved only when their parent becomes incapable of managing their finances themselves.
What to do when a bank refuses your POA
Banks are now obligated to provide recourse to clients (your parents) or attorneys when they refuse to act on a POA or attorney’s (you as son or daughter) instructions. The Advocacy Centre for the Elderly (ACE) recommends the following steps in the face of a refusal to do so.
- Client or attorney should first contact the bank’s Office of the Ombudsman (all 5 major banks in Canada have one).
- If unresolved, escalate to the Ombudsman for Banking Services and Investments (OBSI).
- Consult a lawyer.
It can be quite challenging, not to mention time consuming and exasperating to try resolve the issue of POAs not being recognized by the banks.
It doesn’t have to play out this way. You and your parents can be proactive and prevent this problem!
Take these steps to get your POA recognized at the bank
- Do it early, when there is no question of capacity.
- Go to the branch with your parents. Have your parents introduce you to the Bank Manager.
- Take the POA to the bank and have it reviewed and accepted. If there are problems with it from the bank’s perspective, these can be addressed while there is no question of capacity.
- Your parents should ask the bank if they also have their own internal documentation required, which will give someone the power to manage their finances. Be sure to check whether your CPOA is still valid if you sign the internal bank papers.
What surprises you most about this information? We would love to hear from you?