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Why Did Financial Institutions Refuse to Honor Her Power of Attorney?

She had carefully filled out paperwork but still wasn’t allowed to access her mother’s accounts

spinner image leslie kremer and her daughter kristen mcdermott
Kristen McDermott (right) needed help after her power of attorney documents were rejected and she couldn't get access to her mother Leslie Kremer's accounts.
Catherine Ledner

What can you do when a money manager won't accept an essential estate planning document? Kristen McDermott of Fryeburg, Maine, needed an answer.

McDermott, 58, a professional gardener, told me she had power of attorney (POA) for her mother, Leslie Kremer, 85, who has dementia. Kremer’s bank and former employer honored that POA, which Kremer granted 14 years ago giving McDermott legal authority to manage her mother’s finances.

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But two financial companies — Vanguard and USAA — wouldn’t let McDermott act for her mother. She had called, supplied documents, called again — and gotten nowhere.

“I am at my wit’s end,” she wrote.

Types of power of attorney documents

McDermott’s email shook me. I have power of attorney for my mother, and as in McDermott’s situation, a capable attorney created it. To have a POA not honored in a crisis would be awful.

First, let’s clarify: Powers of attorney aren’t all the same:

  • A general POA allows a designated person to handle all financial matters on your behalf.
  • A special or limited POA is for a specific purpose, such as having someone sign for you at a real estate closing.
  • A durable POA is in force at all times.
  • A non­durable POA ends if you become incapacitated or disabled.
  • A so-called springing POA goes into effect only if you become incapacitated.

McDermott had a durable POA, so she thought she was set.

Institutions may have additional requirements

Vanguard thought otherwise.

“We have our own, very specific POA paperwork,” says Lauren Wybar, a senior financial planner at Vanguard.

How often are customers surprised to hear they need Vanguard’s special forms? “All the time,” Wybar says.

Vanguard’s version of a POA is called the Vanguard Agent Authorization form, which the company says was designed to be valid in the face of state-by-state variations in POA laws. Presumably, if Kremer had found it among the various forms on Vanguard’s site, filled it out and submitted it prior to the onset of her dementia, McDermott would now be able to access her mother’s account.

But — the exact reasons why are still unclear to me — Vanguard made McDermott send in not only a clearer copy of the POA she’d previously submitted but also a new set of documents: the company’s Agent Certification for Incapacitated Person form and a letter from Kremer’s doctor attesting to her condition.

The problem was different at USAA, which works only with military families. Although USAA would accept McDermott’s POA, it wouldn’t discuss her mother with her because McDermott wasn’t a USAA member. A free membership solved that.

How to prevent refusal of your POA

Unfortunately, POA roadblocks are common, says John T. Midgett, president of the National Association of Estate Planners & Councils.

“POAs are not given the due deference they deserve,” he says. One alternative is to set up a revocable trust containing your assets.

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Getting a lawyer to set one up can be costly, though, and doing it yourself runs the risk of getting the details wrong. If you stick with a POA, here are some suggestions:

Be proactive. Put your POA on record while you’re well so you can find out whether an institution will reject it, says David York, a Utah-based estate planning attorney. (I think firms need to do a better job of telling you what they’ll accept.)

Tell your family. “A legal document is only good if someone knows that it exists,” York says. Let loved ones know where you keep copies.

Consolidate your finances. Because different companies have different rules for POAs, the fewer you have to worry about, the better.

Resolving the issue

Regrettably, McDermott’s problems were fixed only after I called public relations departments at USAA and Vanguard.

“I am fine with the process being rigorous, but it shouldn’t be such a mystery,” she says. “I don’t know if I would ever have figured it out on my own.”

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