It’s maddening! Dorothy is stuck! Her father executed a power of attorney prepared by a local elder law attorney in 2010. The POA has all the necessary bells and whistles to enable Dorothy, his only child, to take care of any business matters that might come up after a possible incapacity.

Dad has all of his investments and a modest IRA at Big Bank & Trust. After his stroke Dorothy blew into town from Kansas and prepared to step in for her father. There’s only one problem.

“We can’t use your power of attorney because bank policy requires that you use our form POA which has been pre-approved by Legal,” declares the banking rep with the assured authority of a TSA screener looking for contraband.

“But Dad has had a major stroke! We aren’t even sure how much he understands anything.” Dorothy just can’t believe this.

The banking rep must realize she was a bit harsh. With a comforting hand on Dorothy’s shoulder she assures her that she “can always bring a guardianship proceeding.” In fact, the banking rep helpfully offers the name of a local attorney to handle the guardianship.

The Other Attorney

Dorothy visited the attorney recommended by the bank. The attorney, a nice enough young man, explains the guardianship process and tells Dorothy that as guardian she’ll have all the authority she needs to pay all of Dad’s bills and expenses.

Dorothy was startled. “But what about transferring his assets to a trust? Or to me? Dad always said he was afraid of losing everything in case he went to a nursing home?”

“Sorry,” explained the nice enough young attorney, “but you’ll need court approval for that . . . and good luck with that!”

Despair . . . and Then Help

Dorothy sat down on her father’s front porch and started crying. Thinking she was dreaming, through her tear-blurred vision, Dorothy saw what appeared to be a young woman floating toward her on blindingly white wings and wearing an outlandishly huge and glowing crown.

The woman spoke kindly to Dorothy, but in a strange English accent that sounded nothing like Kansas. “I am called Glinda. You must seek the advice of a competent elder law attorney. Your father’s elder law attorney is a wise and kindly soul named Professor Oscar Zoroaster Diggs (many people call him “Oz” but say he looks like Bob Mason).”

“But, but . . . how do I find this attorney?”

“Dorothy, my child, you must follow the Yellow Brick Road.”

“But, but . . . where is that?”

The woman smiles kindly and says, “Dorothy, just get on Google and look for ‘Asheboro Elder Law Attorney.’” Glinda floated away before Dorothy could ask for an address or name.

The Elder Law Attorney

Dorothy appeared in my office with her little dog and said I didn’t look at all like a wizard (which I thought odd because I am just a 60-something year old elder lawyer). In any event, Dorothy told me the sad tale of hers and her father’s situation (which you just read about).

I told Dorothy she wouldn’t need brains, heart nor any courage . . . but with a little help from me she and her father would be fine.

I explained that North Carolina law is on her side. Read on to find out why.

If the Power of Attorney is Good, the Banks Must Honor It

Almost nine years ago the refusal of banks and other financial institutions to honor otherwise valid powers of attorney was becoming a real problem. As with Dorothy and her father, it wasn’t always possible for the principal (Daddy) to simply execute a new power. Further, an institution’s form power may have contained provisions that the customer would rather not have in a power of attorney. Finally, institutional legal departments (oftentimes hundreds of miles away in other states) were taking too long to review North Carolina powers of attorney.

At last, the Estate Planning and Fiduciary Law and the Elder Law sections of the North Carolina Bar Associations got busy on the legislative front.

Pardon the statutory citations . . . we do have some geek readers.

Pursuant to NCGS § 32A-42 a bank or other financial institution has seven business days to notify the agent whether they intend to honor the power. As part of that process, under NCGS § 32A-40 the bank may require the agent to execute an affidavit in which the agent swears that the power has not been revoked and that there are no conditions that would otherwise render the power invalid.

Unless the bank is aware of some fact that would render the power invalid, it better honor the power of attorney and allow the agent to conduct business according to its terms. Being wrong has consequences.

If a bank refuses to honor a power of attorney, the agent or principal may initiate a special proceeding before the clerk of the superior court to render a decision as to the validity of the power of attorney.  NCGS § 32A-42(f).

If the power of attorney is found to be valid under North Carolina law, the institution is liable for the costs and attorney’s fees incurred in bringing the proceeding.  NCGS § 32A-41. Of course, if the agent was fibbing a bit and the power wasn’t valid because it had been revoked, for example, the agent would be on the hook.

Bottom Line

A few phone calls to the bank legal department, with a discussion of North Carolina law, quickly straightened the problem out. I have threatened the procedure on several occasions and have never had to follow through with a special proceeding. The financial institutions don’t want the hassle.

Oh . . . it’s so good to be back home.

The end.