by Gary Foreman

In recent years, some institutions have stopped accepting a valid power of attorney. We talk with a lawyer about this important legal document and how to avoid problems using one.

It happens every day. Your husband or wife is incapacitated. You need their signature on an important financial or medical document. That’s when a legal document called a power of attorney comes in.

Some institutions are now refusing to accept a valid power of attorney. To help us understand what a power of attorney is and how to avoid problems using it, we spoke with Tom Batterman. Mr. Batterman is a lawyer and Certified Trust and Financial Advisor. He founded and heads Fiduciary First Advisors in Wausau, Wisconsin.

Q: What exactly is a power of attorney?

Mr. Batterman: It is a document that grants another person the right to act on your behalf.

Q: Why would anyone, especially retirees, want to have a power of attorney?

Mr. Batterman: There are many reasons one could need a power of attorney. For example, you need to sign a deed, and you will not be available on the day the closing occurs.

However, the most common reason you should have a power of attorney is to put someone of your choosing in a position to make decisions for you if you should be incapable of doing so. If you don’t have a power of attorney and someone has to make decisions for you, you have to go through the legal process of having a legal guardian appointed for you, which is time-consuming and unnecessarily expensive.

Q: Are there things that a power of attorney cannot authorize?

Mr. Batterman: That is a broad question. I suppose you cannot grant someone a power of attorney to do something illegal. Within the realm of legal activity, powers of attorney can be very limited (such as signing a deed on such and such a date for such and such a transaction) or very broad (basically anything you yourself could do) or anywhere in between. It just depends upon what power you want to give the person to act on your behalf.

Q: There are two kinds of power of attorney documents. What are they? And how do they differ?

Mr. Batterman: They concern health care and financial. The Health Care power of attorney grants someone the power to make decisions for you about health care matters. These can be very narrow or very broad. The financial power of attorney grants someone the power to act on your behalf concerning financial matters over which you want to allow them that authority.

Q: In this article, you point out that some banks and other institutions are refusing to accept a power of attorney. Why is that and what can the holder of the power do in that case?

Mr. Batterman: Some financial institutions have required that the financial power of attorney be executed within a certain period of time from the time you are seeking to use it. To me, that kind of defeats the purpose of doing that planning. The power of attorney can be revoked at any time and a financial institution is released from liability for acting based upon a valid power of attorney of which they have no notice of revocation.

The only thing you can do in that situation is argue with the institution to accept the existing document based upon this rationale or prepare a “fresh” power of attorney that restates the original one but within the necessary time frame. Otherwise, the attorney, in fact, will not be able to act and you can either not do what you want to do, or you need to go to court to get a guardian appointed to do what needs to be done.

Q: What steps, if any, can be taken to prevent this type of problem?

Mr. Batterman: You can periodically refresh your power of attorney documents. I have a hard time advising people to do this because having a power of attorney available in the future if you are incapacitated is an essential and vital instrument use. I think the issue lies more with third-party reliance than the document itself. The best solution is to get third parties to rely upon them.

• Understanding When To Use a Power of Attorney
• Trust Basics for Retirees
• Legal Documents You Need In Your 50s
• Financial Paperwork and Information Your Elderly Parents Should Have On Hand

Reviewed October 2023

About the Expert

Tom Batterman is founder of Vigil Trust & Financial Advocacy and Fiduciary First Advisors. Having provided objective, fee-only financial management services for over two decades, he specializes in managing the investment and related financial affairs of individuals and mutual insurance companies who do not have the time, interest, or expertise to manage such matters on their own.

About the Author

Gary Foreman is the former owner and editor of the After50Finances.com website and newsletter. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money, Credit.com and CreditCards.com.