An officer or employee of a financial institution who suspects financial abuse of an elder or dependent adult is a mandated reporter under the law. A mandated reporter is a person, who as a result of his or her profession, in this case banking, is more likely to be aware of elder abuse or neglect. A mandated reporter, under current California Probate Law, is required to report financial abuse or face legal consequences. A teacher or day care worker who suspects child abuse is an example of a mandated reporter. In this case, however, the financial institution must report suspected financial abuse against an elder.
While attempting to guard elders against financial abuse, California Probate Law also provides for the "creation and effect of powers of attorney." A Financial Power of Attorney allows an individual to appoint someone to manage financial affairs on his or her behalf.
Financial institutions have the power to refuse to honor Power of Attorney Documents. Their goal is not to cause unnecessary problems for their customers, but instead to protect themselves legally. Effective January 1, 2018, Probate Code AB 611 gives financial institutions solid legal grounds upon which to refuse a Power of Attorney document. Specifically, AB 611 authorizes a mandated reporter (employee/officer of the financial institution) to deny a Power of Attorney in situations where the mandated reporter has reported elder financial abuse. In other words, if Joe Smith walks into Jill Smith's bank with a Power of Attorney document that names him as the agent or attorney in fact for Jill Smith, the bank's officer, Jim Jones, can refuse to honor the Power of Attorney if Jim has made an official report indicating he believes Joe Smith is committing elder financial abuse against Jill Smith. In general, the official report will have been made to an adult protective agency or a law enforcement agency.
The first priority of financial institutions is ensuring that an agent or attorney in fact has legal authority to act on behalf of an account owner. Otherwise, the institution faces potential legal liability. In my practice with Estate Planning, Trust Administration, Conservatorships, and Elder Abuse, I have seen many instances in which financial institutions refuse to honor a Power of Attorney. In most cases, it is because there is some question as to the authority of the agent (think trust or probate litigation where a family is in dispute or there are allegations of elder abuse), but in some instances it is over a nit picky legal phrase.
The bottom line is that AB 611 strengthens the already broad powers financial institutions have when it comes to honoring powers of attorney. The law seeks to protect both financial institutions and their customers by clarifying the legal procedure for refusing an agent or attorney in fact who is suspected of financial elder abuse.
Despite the fact that Power of Attorney documents will not always be honored by a bank or other financial institution, they are extremely useful when they do work.
An experienced Estate Planning attorney should know the tips and tricks of drafting an effective and legally valid Power of Attorney. A reputable trust and estate attorney can also work with the client to foresee potential issues that may arise, and draft the document accordingly.
For questions about Power of Attorney documents or your Estate Plan in the San Francisco East Bay, contact our Trust and Estate Law Firm at 925-322-1795.