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Home » Is Your Power of Attorney Powerless? What to Do When a Third Party Won’t Honor an Agent’s Authority

Is Your Power of Attorney Powerless? What to Do When a Third Party Won’t Honor an Agent’s Authority

September 11, 2019Estate Planning

Carmel estate planning attorneys

A Power of Attorney is one of the most commonly used estate planning documents due in large part to how flexible it can be. Consequently, most people are familiar with what a Power of Attorney does and how to use one. When all goes as planned, a Power of attorney is extremely useful and easy to use; however, what happens when all doesn’t go as planned and your Power of Attorney appears to be powerless? The Carmel estate planning attorneys at Frank & Kraft explain what to do when a third party won’t honor an Agent’s authority when presented with a Power of Attorney.

How Does a Power of Attorney Work?

A Power of Attorney is a legal document that allows you ( the “Principal”) to grant another person (the “Agent”) the authority to act on your behalf in legal matters and transactions.  The type and extent of the legal authority you grant to an Agent depends on the type of POA you create.

General vs. Limited Power of Attorney

When a Principal creates a POA he/she must decide if it will be a general or limited POA. A general POA grants almost unlimited power to the Agent to act on the Principal’s behalf in legal matters and transactions. An Agent with a general Power of Attorney may be able to do things such as withdraw funds from the Principal’s financial accounts, sell property and assets owned by the Principal and even enter into contracts in the Principal’s name. A limited POA, on the other hand, only grants the Agent the limited authority enumerated in the POA document. Parents with minor children often use a limited POA as a way to provide a caregiver the authority to consent to medical treatment in the event of an emergency. A Principal might also use a limited POA to give someone the legal authority to attend the closing on the sale of a home or to sell a vehicle in the Principal’s absence. Both a general and a limited POA can be made durable which means that the authority granted to the Agent in the Power of Attorney survives the incapacity of the Principal.

What Can You Do If a Third-Party Won’t Honor the Agent’s Authority?

State law governs most issues related to a Power of Attorney, including any limits on an Agent’s authority under a general POA. For example, some states prohibit an Agent from making end of life health care decisions even if the Agent has a general POA. A special type of advance directive must be used to make those type of decisions. Other than any statutory limits imposed by state law, a third party is legally required to honor an Agent’s authority when presented with a valid power of attorney. Despite the law being very clear on this issue, third-parties still refuse to honor an Agent’s authority sometimes. Common reasons a third-party might offer for effusing to honor an Agent’s authority include:

  • Challenging the validity of the POA. Something about the document itself, the circumstances, or the Agent may make a third-party challenge the validity of the Agent’s authority. As a general rule, the law will allow a third-party to ask for proof that a POA is valid if the request is reasonable. If you are the Agent, and can provide whatever proof the third-party is requesting, it is usually best to just do so. If you are unable to provide the proof (for example if the third-party wants to speak to the Principal but he/she is incapacitated) then it is time to consult with an attorney.
  • Claiming that the POA is “expired” or “stale.” This is fairly common. A third party may claim the POA was executed too long ago and, therefore, it is no longer valid. Legally speaking a POA never “expires” nor can one become “stale.” It could have a termination date included in the POA or it could have been revoked, but it does not expire nor can one be stale. If you can easily have the Principal execute a new POA that is usually the best solution; however, if a new POA cannot be easily procured, talk to an estate planning attorney.
  • Using the Third-Party’s Form a POA There are some third- parties, such as banks, that often want a POA to be executed on their own form. Legally, a third-party cannot require a POA to be executed on their own form; however, if it is possible to get the Principal to do so, it is often easier to simply comply than to challenge the third-party. If the Principal is unavailable, you may need to talk to an experienced estate planning attorney about the situation.

Contact Carmel Estate Planning Attorneys

For more information, please download our FREE estate planning worksheet. If you have additional questions about an Agent’s authority under a Power of Attorney, contact the experienced Carmel estate planning attorneys at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.

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Paul A. Kraft, Estate Planning Attorney
Paul A. Kraft, Estate Planning Attorney
Paul Kraft is Co-Founder and the senior Principal of Frank & Kraft, one of the leading law firms in Indiana in the area of estate planning as well as business and tax planning.

Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.
Paul A. Kraft, Estate Planning Attorney
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