You carefully prepared powers of attorney as part of your estate plan. Then a family emergency occurs, and when your agent tries to use the document, the bank, brokerage firm, or insurance company refuses to accept it.
Unfortunately, this situation is more common than many people realize.
The good news is that a refusal does not necessarily mean the power of attorney is invalid. This article discusses practical steps to take when a third-party questions or refuses to act on a power of attorney.
Like all information on this website, this post is educational in nature, and is not to be relied upon as legal advice. Consult an attorney for counsel specific to your situation.
Palley Law Office is an estate planning firm located in Chicago, Illinois, serves clients in the greater Chicago area, and provides prospective clients an initial consultation at no charge.
Why Third Parties Sometimes Refuse a Power of Attorney
Financial institutions and other organizations are often cautious when dealing with powers of attorney.
From their perspective, they are being asked to rely on a document that allows one person to act on behalf of another. If they mistakenly honor an invalid document, they may expose themselves to liability.
As a result, institutions frequently review powers of attorney carefully before allowing transactions.
Common Reasons for Rejection
A power of attorney may be questioned if:
- The document appears incomplete or improperly signed.
- The institution has concerns about whether the principal had capacity when the document was signed.
- The institution believes the power may have been revoked.
- There are concerns about fraud, undue influence, or financial exploitation.
- The requested transaction exceeds the authority granted to the agent.
- The institution needs additional verification that the principal is still living and that the power remains in effect.
In some cases, the institution may simply need more information before proceeding.
“You Must Use Our Form”
One of the most frustrating responses an agent can receive is:
“We only accept our own power of attorney form.”
Under Illinois law, a financial institution generally cannot refuse a properly executed Illinois statutory power of attorney solely because it is not on the institution’s preferred form.
That does not mean every dispute is easy to resolve, but a bank’s preference for its own form is not automatically a valid reason to reject an otherwise valid statutory power of attorney.
What Additional Documents May Be Requested?
Illinois law allows third parties to request reasonable supporting information before accepting a power of attorney.
Common requests include:
- A certification signed by the agent confirming that the principal is still living and that the power of attorney remains in effect.
- A certified copy of the power of attorney.
- A letter from the principal’s attorney confirming the validity of the document.
Providing these materials often resolves the issue without further dispute.
What If the Refusal Seems Unreasonable?
Illinois law generally requires third parties to honor valid powers of attorney unless there is a legitimate reason not to do so.
In fact, a third party that arbitrarily or unreasonably refuses to honor a valid power of attorney may face legal consequences and potential liability for damages.
Every situation is different, however. Before assuming a refusal is improper, it is important to determine exactly why the institution is refusing to act.
Practical Steps to Take
If a power of attorney is rejected:
- Ask for the specific reason in writing.
- Request the name and title of the person making the decision.
- Determine whether additional documentation is being requested.
- Review the power of attorney to confirm that it grants authority for the transaction in question.
- Consult with an attorney if the refusal appears inconsistent with Illinois law.
Often the issue can be resolved with additional documentation or by escalating the matter to the institution’s legal department.
Podsumowanie
A power of attorney is one of the most important estate planning documents a person can sign, but having the document is only part of the equation.
When a bank, brokerage firm, or other institution refuses to honor a power of attorney, the problem may be anything from a missing certification to a misunderstanding of Illinois law. Determining the reason for the refusal is usually the first step toward finding a solution.
If you are encountering difficulties using a power of attorney in Illinois, obtaining legal guidance early can often prevent delays and help ensure that the principal’s affairs are managed when assistance is needed most.
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Palley Law counsels clients throughout the Chicago area in powers of attorney, wills, trusts, and estate planning, and provides prospective clients an initial consultation at no charge.
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