According to a special editorial published in the Akron Legal News, proposed state legislation may make General Durable Powers of Attorney (POAs) more effective, by prohibiting third parties such as banks, insurance companies, and financial institutions from baseless refusals to accept the planning instruments. A power of attorney document gives authority to an agent to act on behalf of another in legal or financial matters. Elder law and estate planning attorneys commonly use POAs as a tool to plan for the incapacity of their clients.
Ohio has enacted a Uniform Power of Attorney Act, which lays out the mandatory language that must be incorporated into these planning instruments in order to comply with Ohio law. In most cases, a power of attorney specifies that it will continue after the incapacity of its maker; such instruments are known as a durable power of attorney.
Democrat Rep. John Rogers of Mentor-on-the-Lake has championed a bill that addresses the growing problem of third-party institutions rejecting lawful Ohio powers of attorney. House Bill 446 would prohibit a person from refusing to accept an acknowledged power of attorney for a transaction or requiring an additional or different form for any authority granted in a statutory power of attorney. The measure would be subject to specified exceptions and provide sanctions for a person who fails to comply with the bill's provisions. This blog contains several articles discussing how powers of attorney can be rendered impotent as a planning tool. For example, consider the 2014 article, The Impotent Power of Attorney, available by clicking here.
Rogers told the Akron News that he has had a number of POAs refused to be honored in recent years in both his personal life, and in his professional capacity:
Reasons that these legal documents have been rejected include the document having been prepared more than six months prior to the presentation date and a successor agent was named on the document.
"Attorneys who draft documents are subject to malpractice if documents they have prepared were done so contrary to law." Rogers said. "Consider the grave consequences that could ensue to a denied client."
* * *Rogers shared with members of the House Civil Justice Committee the circumstances of a now-deceased client.
"This senior was wheelchair bound and scheduled a 'Dial-A-Ride' service through the local public transit authority to take him to his financial institution," Rogers began. "Once there, he presented his POA to a (bank) employee, who after reviewing the document advised my client that his POA was not to be honored in its present form.
"Specifically, my client was told that having named a second adult child as a successor agent was not permitted. The employee proceeded to advise my client that the document needed to be redrafted according to their specifications and offered to refer my client to someone in house to help, if necessary."
Rogers recounted when his client called him after the incident and requested Rogers draft another power of attorney.
"I offered to contact the institution on his behalf, but he asked that I redraft the document in accordance with the bank's instructions," the lawmaker said. "I did so, at no expense, but in my opinion, what had happened was unconscionable."
HB 446 would prohibit a person from refusing to accept an "acknowledged" power of attorney - one defined as verified before a notary public or other individual authorized to take acknowledgments - for a transaction or requiring an additional or different form of power of attorney for any authority granted in a statutory form power of attorney unless any of the following applies:
- The person has actual knowledge of the termination of the agent's authority or of the power of attorney;
- The person in good faith believes that the transaction is outside the scope of the authority granted to the agent in the power of attorney;
- The person in good faith believes that the power of attorney is not valid.
"In keeping with our desire to cut unnecessary and duplicative red tape in business transactions, this bill will eliminate the need for citizens to pay for two POAs when only one is needed," HB 446 joint sponsor Rep. Bill Seitz, R-Cincinnati, said in the press release quoted by The Akron Legal News [the press release was not yet publicly available on Rep. Seitz's archive of press releases. "Pride of authorship is an insufficient reason to reject a POA that was properly prepared by a different Ohio attorney."
A failure to comply with the law would result in sanctions with liability to the dishonoring institution for reasonable attorney fees and costs to confirm or mandate the acceptance of the properly prepared and executed document, the lawmaker duo said during testimony.
Eight fellow House members have signed on as cosponsors of the bill, which had not been scheduled a second hearing at time of publication.
Whether this bill becomes law remains to be seen. There is, of course, a powerful bank lobby that may frustrate the bill's passage. The bill, at least as presently written, does not appear to contain a release from liability for institutions, such as banks, that accept an instrument based upon the representations of the presenter and the notary before which the instrument is signed and acknowledged. That means that institutions like banks might remain liable for damages when accepting forged or fraudulent instruments despite being encouraged to do so by the penalty for refusing to accept the instrument. One can imagine that this situation might put the institution in a precarious Catch-22 or dillemma.
Regardless, the bill is a welcome acknowledgment by at least some lawmakers regarding the weakness of the instrument as a planning tool. Since most people employ a power of attorney for the expressed purpose of avoiding resort to a more cumbersome legal process through the courts, it is unfortunate that third parties so easily frustrate this objective without cause.
No comments:
Post a Comment