When a person grants a power of attorney to an agent, the agent will have the authority to do certain things on behalf of the grantor. Examples of power of attorney included conducting business transactions, making medical decisions. These powers depend on the terms of the power of attorney and the type of power of attorney given.
In some instances, people with a power of attorney may run into issues wherein institutions, such as banks, refuse to recognize and accept the authority. A reason for this can be because the power of attorney does not grant that specific authority or the institution is not mandated to accept it.
To further understand, one has to look at the two types of powers of attorney: a common law power of attorney and a statutory power of attorney.
Common Law Power of Attorney
A common law power of attorney only serves as an authorization. With that, the grantor has more control over what they want to authorize, which makes it an ideal type of power of attorney for business transactions, purchasing commercial real estate, etc. With a common law power of attorney, the grantor can create intricate authorization that allows another person to act on their behalf.
However, because it is only an authorization, banks and other financial companies are not mandated to accept it. This may not be a problem in business transactions since the parties can always draft another type of agreement. However, it can be frustrating in cases of incapacity, where the bank has no obligation to accept it. In these cases, a statutory power of attorney is more ideal.
Statutory Power of Attorney
Banks and other financial institutions are required to accept statutory powers of attorney if the document giving the authority sticks very specifically to the language in the statute and the rights have not been waived in another agreement. If the institution does not accept it, they can be sued for damages. Gaving a statutory power of attorney is better in incapacity cases to ensure that there aren’t any problems with banks.
However, it’s worth noting that the laws on statutory power of attorney were redone in 2014. Any statutory power of attorney established before 2014 is now recognized as common law powers of attorney, and hence there is no obligation for banks and financial institutions to accept it. So when it comes to incapacity cases, it’s important to make sure that the statutory of attorney is newer than 2014.
The bank is not obligated to accept a power of attorney if it’s a common law power of attorney, or a mere authorization. It has to be a statutory power of attorney that sticks to the language of the law for the institutions to be mandated to accept and honor it.