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Home >> Can a Third Party Refuse to Honor a Power of Attorney?

Can a Third Party Refuse to Honor a Power of Attorney?

April 25, 2016 by Robert Kulas.

Power of attorneyA power of attorney, or POA, is one of the most commonly used legal documents because of the numerous purposes a POA can serve. At some point in your life you will likely execute a POA, making you the “Principal” as well as be appointed as an “Agent” under a power of attorney executed by someone else. Considering how often POAs are used you might think that the authority of an Agent under a POA is never questioned; however, the truth is that third parties refuse to honor the authority of an Agent under a POA with some frequency.  Banks, for example, are notorious for refusing to honor, or at least questioning, the authority of an Agent when presented with a power of attorney. If you have been appointed as an Agent under a valid POA you need to know whether a third party can legally refuse to honor a power of attorney, and, if so, under what conditions.

What Is a Power of Attorney?

A power of attorney is a legal agreement whereby the Principal (the person granting authority) grants authority to an Agent to act on behalf of the Principal in legal matters. The extent of the authority granted to an Agent by a Principal will depend on the type of POA the Principal executed. Under a general POA an Agent has virtually unfettered authority to act, meaning the Agent can use the POA to do things such as withdraw funds from the Principal’s bank account, enter into a contract in the Principal’s name, and even sell assets owned by the Principal. On the other hand, an Agent with a limited, or special, POA only has the authority specifically enumerated in the POA agreement. A parent, for instance, might grant a caregiver a limited POA that allows the caregiver (Agent) to consent to medical treatment for a minor child in the parent’s (Principal’s) absence. In addition, because the authority granted under a traditional POA terminated upon the death or incapacity of the Principal, the “durable” power of attorney was created. An Agent’s authority under a “durable power of attorney” survives the incapacity of the Principal.

How an Agent Uses the Authority Granted in a POA

Once an Agent has been granted authority under a POA, using that authority should be relatively simple. Legally, a POA gives the Agent the authority to act on behalf of the Principal. Consequently, all an Agent should have to do is provide a third party with proof of the Agent’ authority by providing an original, or certified copy, of the POA agreement in order to exercise the Agent’s authority. Sometimes, however, it is not quite that easy to use the authority granted by a POA.

Common Reasons for Refusing to Honor a POA

Despite the clear authority granted to an Agent in a POA, third parties (particularly banks and other financial institutions) sometimes refuse to honor the Agent’s authority. Some of the most common reasons given by third parties include:

  • The POA is “stale” – a very common excuse given by third parties for refusing to honor a POA is that the authority granted therein is “stale” because the agreement was executed some time ago. Legally, this is not a valid reason to refuse to honor the POA; however, because trying to use an old POA so often leads to problems, it is a good idea to have the Principal update the POA every three to five years just to avoid problems.
  • Not on the proper form – financial institutions, in particular, often refuse to honor a POA if it is not on their own POA form. Legally, a third party usually is required to accept any valid POA; however, if the Principal is available it is often easier to just execute a new POA on the third party’s form than to argue the issue. Of course, you should have your estate planning attorney review the form before agreeing to sign it though if you are the Principal.
  • No proof of incapacity – if the POA is a “springing POA” it means the Agent’s authority only “springs” into action upon the occurrence of a triggering event, usually the incapacity of the Principal. Sometimes, therefore, a third party may question whether the event has occurred. In this case, you may need a letter from a physician declaring the Principal to be incapacitated.

Although third parties do sometimes refuse to honor an Agent’s authority under a POA agreement, in most cases that refusal is not legal. If you find yourself facing a refusal, that is not easily resolved, you may need to seek a court order that will force the third party to honor your authority. In that case, the law allows you to collect attorney’s fees if the third party unreasonably refused to accept the POA.

Contact Us

If you have additional questions about honoring a power of attorney, or estate planning in general,  in the State of Florida please contact the experienced estate planning attorneys at Kulas & Crawford, by calling 772-398-0720 to schedule an appointment. In addition, please download a free copy of our “Solid Estate Plan Checklist.”

Filed Under: Powers of Attorney

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Everyone treated us extremely well.  Robert explained how a trust works and the benefits of having one.  We decided to move forward and complete the process.  He was very kind and knowledgeable.  Julie was also very helpful and very patient with our questions.  We felt very comfortable with this firm handling our affairs.  We would highly recommend this firm to our friends and family.

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"Everyone treated us extremely well.  Robert explained how a trust works and the benefits of having one.  We decided to move forward and complete the process.  He was very kind and knowledgeable.  Julie was also very helpful and very patient with our questions.  We felt very comfortable with this firm handling our affairs.  We would highly recommend this firm to our friends and family."

Janice M
Client Review
August 25, 2020
    

Robert Kulas and staff made making a will an easy to understand process. They were very knowledgeable and attentive to my wishes. All my documents were provided in an organized binder which will be a great asset to my family. I would definitely recommend them.

Krissy L.
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August 25, 2020
    

I have worked with Mr. Kulas & staff before. And they are very professional. I am very satisfied with Mr. Kulas and his staff and give them the highest satisfaction and 5 star rating.

Leo C.
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Mr. Kulas and his staff have been extremely helpful & knowledgeable for the over 3 years we have been associated. They are easy to talk to and explain everything without feeling rushed. Very competent and professional.

Mildred W.
Client Review
August 25, 2020
    

I have known Robert Kulas for 20 years since I was co-executor for friends who had Mr. Kulas prepare a Trust for them. When I felt I needed a trust also, I came to him. I have always been completed satisfied with his work and that of his charming, competent staff.

Joan C.
Client Review
August 25, 2020
    

We began our estate plan process in 2004 (12 years ago) and have been pleased with the periodic reviews we have gone through and when changes have been needed the firm has been thorough and professional in making those changes.

L.G.K.
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