Do I Have to Accept this Power of Attorney?

By Robert Wilkins

If you have contacted our office to help analyze a power of attorney (POA), then you’re probably familiar with the general rule that your financial institution should accept and honor the authority granted to an agent under a facially valid POA.  As incentive to promote the use of POAs, the law generally protects third parties that accept facially valid POAs in good faith.  Failure to do so can create all kinds of problems and pushback from members and their agents.  If the situation warrants, failure to accept a facially valid POA can even subject a financial institution to potential liability for the agent’s attorneys’ fees in the event the agent has to go to court to enforce their authority.

Of course, this does not mean that there are not factual scenarios that come up every day that call into question whether a POA should be accepted and what type of authority the agent has been granted.  “What do we do with these competing POAs?” “Is the language in the POA broad enough to authorize the agent to take a specific action?” “This agent doesn’t seem to have good intentions. What do we do?”  These are just a small subset of the types of questions we field regarding POAs on a daily basis.  Depending on the specific facts of a particular situation (type of action the agent is seeking to take, age of the POA, capacity of the principal, amount and type of assets the agent is exercising authority over, etc.), detailed analysis of the risks and benefits of accepting are warranted.

Notwithstanding the general rule about accepting facially valid POAs, there are a few provisions of California law that go the other way and offer third parties the ability to reject facially valid POAs under certain circumstances:

• Elder Abuse/Financial Exploitation: Under California law, a financial institution is a mandated report of suspected financial abuse of an elder or dependent adult.  A mandated reporter of suspected financial abuse is authorized to not honor a POA if it has made a report to the adult protective services or law enforcement agency of any state, that the principal may be subject to financial abuse by the agent or a person acting for or with the agent (California Welfare & Institutions Code § 15630.1(j)).  This means that if the financial institution has filed an elder abuse report with respect to a specific agent/principal, it does not have to honor that POA with respect to that agent.  It is important to note here that rejecting a POA under this circumstance can be complicated because elder abuse reports are typically confidential – accordingly, you cannot tell the agent that you are rejecting the POA because you have filed an elder abuse report.
• New Relationships: Financial institutions are not required to honor requests by an agent to open a new deposit or lending relationship for a principal that isn’t already a depositor or borrower of the financial institution (California Probate Code § 4310). In other words, if the principal is not a current member of a credit union, that credit union does not have to open a deposit account just because the agent presents a facially valid POA.  Similarly, if a credit union member only has a deposit account, and an agent presents a facially valid POA authorizing them to borrow on the member’s behalf, the credit union would not be required to allow the agent to open a loan or credit card because the member is not a current borrower of the credit union.
• Agent Breach: Third parties are not required to work with agents that have previously breached an agreement with the third party (California Probate Code § 4309). This means that if you have an agent that has previously defaulted on a loan or otherwise breached the terms of an account agreement with your financial institution, you are not required to work with that person in their capacity as agent for another person, despite the fact that they are working under the authority of a facially valid POA.

While “POA law” doesn’t typically change much, the fact scenarios that can arise when a POA is presented are endless.  We hope that this information gives you a little more confidence in handling POAs in some of those potentially tricky situations where you’re thinking that it may not be in the financial institution’s best interest to honor a POA.

About the Author

Robert Wilkins

Robert Wilkins is an Associate Attorney at SW&M with experience in regulatory compliance, trust and decedent accounts, operational matters and cannabis banking. Robert was instrumental in creating the firm’s Cannabis Banking practice. Additionally, he co-authored SW&M’s California Trust Accounts Manual […]

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