Category: Advance Directives
Tags: Estate Planning, Financial Planning, Powers of Attorney


When Powers-of-Attorney are Not Accepted

Posted on: October 10th, 2013
powers of attorneyWhile powers-of-attorney are important estate planning tools, they may not always be recognized by third parties. Why might this happen?
 
The most obvious reason why a power of attorney (POA) would not be honored is if it is invalid. When establishing a power of attorney in North Carolina, the individual must be over the age of 18 and competent. If a POA was executed when the individual was 17, not mentally competent, the victim of undue influence or fraud, then the POA is invalid.
 
When it comes to springing powers of attorney, documents that only take effect when a physician certifies the individual lacks capacity, the North Carolina Court of Appeals ruled that it is a third party’s responsibility to request physician certification. If the third party does not verify the individual is incapacitated, the POA may not be valid.
 
Some financial institutions will only honor powers of attorney created using only their internal forms. This can cause a problem should a loved one become incapacitated and the attorney-in-fact attempts to make financial decisions on their behalf. Some states, including North Carolina, have instituted laws to allow those whose valid POAs are not respected by third parties to recover attorney’s fees.
 
Even when these documents are prepared properly, they may not be honored. More reasons why a POA may not be recognized are:
 
  • When a significant amount of time has passed since the POA was executed. Attorneys-in-fact may have a useless document if it was executed a decade or two prior.
  • When it comes to real property matters, POAs may not be recognized if they were not filed/recorded in the County Register of Deeds in a timely manner.
  • If the POA designates only one agent and they are incompetent or deceased, then the document is invalid.
 
 
These are good examples why it is so important to update one’s estate plan regularly. Ideally, powers of attorney should not be more than five years old. An estate planning attorney will also review the important options of designating primary and secondary agents so that an individual’s careful advanced planning will be valid when they need it most.
 
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