Financial Institutions And The Trouble They Cause With Your Aging Parents’ Funds

The legal profession urges you to get your estate planning done. They draft wills, trusts and empowering documents like the Durable Power of Attorney and Advance Healthcare Directives. Responsible people with means usually get this done. What they and the lawyers they hire apparently don’t think about is what happens when the client, who may be your aging parent, loses independence and needs to depend on the person they’ve appointed on the document.

The agent or “attorney-in-fact” as it’s called on paper, is supposed to act on the aging person’s behalf. The broad authority they are given is standard for the most part, and the state legislatures have approved the wording that goes into these documents. One would think things would go smoothly when the agent, who could be YOU, goes to Dad’s financial institution to access funds after Dad has lost his ability to manage money by himself. What we are seeing is that is does not go smoothly. The banks and financial institutions can and do block access to funds owned by the impaired elder, even when the elder’s appointed agent shows up, proper legal documents in hand.

Here’s a real life example.

Joanne, the daughter of Jason, who has early stage dementia, realized that her father had failed to pay his income and property taxes last year. She knew she had to help him. He is forgetful, but otherwise alert and clear. He had been an investor at a financial institution for decades and had a portfolio there in multiple seven figures. She got letters from his two doctors saying that he had the capacity to appoint Joanne as his agent and that he should not handle finances by himself any longer. She had on hand the notarized Durable Power of Attorney document her father had signed. All looked fine.

But when she approached the financial institution so she could pay Jason’s taxes, they refused to allow her access to any of his invested funds. Worse yet, they simultaneously blocked her father from access to his own funds, on the excuse that he had dementia! His dementia was mild at that point and he was still capable of making decisions. He has memory loss but could manage to pay bills with Joanne reminding him and covering for him when he forgot. Now, the accounts were frozen and Jason could not meet his basic living expenses. It was horrible. The institution treated Joanne like a criminal. They told her it was their “policy” not to allow her access because they didn’t like the wording on the legally prepared and completely valid document her father had signed. They told her if she didn’t like the account being frozen she could go to court and get her father under guardianship. What they failed to acknowledge was that starting guardianship proceedings would destroy the relationship she had with her father. It is a public proceeding. It would cost many thousands of dollars Joanne did not have (she’s a teacher) and that no court was going to put Jason under guardianship because he was still quite functional and articulate. In other words, Jason was not impaired enough to meet the court’s standard for guardianship. She was in a no-win situation with the institution.

Jason is a volatile man, given to explosive temper. She did not want to set him off by telling him about the ridiculous refusal of his financial institution in his managed accounts to let him use his own money. She tried other means to persuade them that their position was wrong and impossible for their account holder. The institution, including Jason’s well-paid account manager, had no loyalty to him whatsoever.

The institution touts in media advertising how much they care about their clients. Their behavior with Joanne demonstrated the exact opposite. They cared about keeping Jason’s money. They cared nothing about the effect of blocking both him and Joanne from using his own money if for his own needs. This dilemma stretched on for weeks. The situation was threatening to become an ugly fight Joanne did not want.

When we consulted with Joanne at AgingParents.com, we devised a strategy designed to bring the legal department of the institution to its senses. At last report they relented and expressed their willingness to accept Joanne’s Durable Power of Attorney and to un-freeze the accounts. No courts were involved. If they do allow her access, you can be sure she will immediately move Jason’s millions to a friendlier institution and close out every account he had at the original one. Account manager fired. Fees for management lost. We do hope their inexcusable conduct was worth it to the institution.

The Takeaways:

If you have an aging parent, spouse or other loved one and you are the appointed agent on the Durable Power of Attorney (DPOA) for finances, approach the bank or institution where your loved one’s money is kept. There is a risk for anyone that we will one day lose our independent decision-making about finances. Find out if they anticipate a problem with you/the agent using the DPOA their account holder has signed as part of their estate plan. Show it to them. Ask for an opinion from their legal department, as that is the source of resistance from these misguided financial institutions. If they decline to give you an opinion that such a document is acceptable, do persuade the account holder to run, not walk to transfer the funds to a different and more accepting bank or institution. They do exist. Joanne already has one picked out. You do not want to be forced into Joanne’s position of being locked out when she needed to pay Dad’s bills for everything from assisted living to income taxes. Locking out both the account holder and his agent, his appointed daughter had an immediate result—no one could get to Jason’s money.

It’s unlikely that I would be writing about this if it were an isolated incident. It is not. In the 15 years of consulting with families at AgingParents.com, we have seen this kind of conduct on the part of financial institutions before, repeatedly. They take strong positions against their own account holders, presumably out of fear that the institution will get sued by someone unknown if they allow the appointed agent to do the job the agent is assigned to do. This does not make legal sense, yet it persists in the industry. The result is horrible stress for the agent, usually a family member of the impaired elder. Nor does it make legal sense to try to force the account holder to be placed under guardianship, for no other reason than the satisfaction of the bank’s legal department. Financial institutions are not the ones to decide who is appropriate for guardianship and who is not. They are not the ones to bear the extensive cost of attempting guardianship when no one but the bank even thinks is is reasonable to do so. They are not the ones with a right to force court proceedings of such heavy consequence on any family.

The best way to thwart this dreadfully unjust policy that persists in the financial services field is to test the concept of your aging parent’s legal document first. When you show them a document you might need in the future and there is no clear answer to your request for whether they’ll accept it, that’s a “no”. Move the money out of there while the elder still has capacity. Otherwise, you could be frozen out, just as Joanne and Jason are at this moment.

I am keeping a growing list of these unreasonable financial institutions. We share it with our clients, often the adult children of their aging elders. Better financial organizations are willing to follow the law about DPOAs in every state. The are the ones who deserve the business. Consider this an early warning of a problem you may not have known exists. Keeping an aging parent’s invested funds at a place that will treat the legally appointed agent with respect is the best way to avoid a nightmare like Joanne has faced.