One of the things that’s becoming more and more frustrating for trusts and estates lawyers in Florida is the refusal of banks and other financial institutions to accept properly drafted powers of attorney.
A power of attorney is a document in which a person (the principal) grants another person (the agent) the authority to act on the principal’s behalf. A power of attorney can be limited in scope — for example, granting the agent authority only to sell a specific piece of real estate. Or it can be extremely broad, granting the agent the power to do almost anything: change beneficiaries on life insurance and retirement accounts, create or modify trusts, give away the principal’s property. The agent is always constrained by a fiduciary duty to the principal.
Section 709 of the Florida Statutes sets forth the rules governing powers of attorney. Despite the clear language of the law, it’s often very difficult to explain to banks that they are required to accept them. Florida addressed this directly: Florida Statute § 709.2120 now provides that a third person who improperly refuses to accept a power of attorney is subject to a court order, plus liability for damages and attorney’s fees. In other words, if you violate the statute, I can sue you, and if I win, you pay my fees.
Recently I was about to sue a bank for their refusal to accept a power of attorney when we reached a compromise. The bank would not, under any circumstances, allow the appointed agent to manage the account — but they would allow the agent to close the account and withdraw several hundred thousand dollars and move it to another bank. So exposing the client to the risk of losing all of their money was acceptable; writing $100 checks for groceries was not.
Not only are probate attorneys tired of this, but courts are getting frustrated too.
In Albelo v. Southern Oak Insurance Company (3rd DCA, Feb. 6, 2013), the home of plaintiff Maximiliana Albelo — who was in her 80s — was burglarized. Before the burglary, she had executed a durable power of attorney appointing her son. A durable power of attorney survives the incapacity of the principal. Under that authority, her son filed a sworn proof of loss with the insurance company.
The insurance company refused to accept it — and called it fraudulent. Southern Oak then argued that Maximiliana was required to have a guardian appointed for herself.
This is exactly backwards. The whole point of a power of attorney is to avoid guardianship. The Court found that the rejection of the power of attorney and the argument that a guardian was needed were frivolous. Both the insurance company and its attorney were required to pay Albelo’s attorney’s fees.
Hopefully this case will help persuade financial institutions to start accepting powers of attorney. I’m not holding my breath.