Clients are often frustrated by banks and other financial institutions that refuse to accept a valid Power of Attorney. The New York legislature responded with General Obligations Law § 5-1504 which states, “[n]o third party located in this state shall refuse, without reasonable cause, to honor a statutory short form power of attorney properly executed … including a statutory short form power of attorney which is supplemented by a statutory major gifts rider, or a statutory short form power of attorney properly executed in accordance with the laws in effect at the time of its execution.”
Specifically, the law states that it is unreasonable for a third party to refuse to honor a power of attorney if the only reason for the refusal is any of the following:
the power of attorney is not on a form prescribed by the third party to whom the power of attorney is presented.
- there has been a lapse of time since the execution of the power of attorney.
- on the face of the statutory form power of attorney,
- there is a lapse of time between the date of acknowledgment of the signature of the principal and the date of acknowledgment of the signature of any agent.i
Despite the above, banks and financial institutions can lawfully refuse to honor a power of attorney if there is reasonable cause.
Reasonable cause is defined to include the following:
- the refusal by the agent to provide an original power of attorney or a copy certified by an attorney
- the third party’s good faith referral of the principal and the agent to the local adult protective services unit;
- actual knowledge of a report having been made by any person to the local adult protective services unit alleging physical or financial abuse, neglect, exploitation or abandonment of the principal by the agent;
- actual knowledge of the principal’s death or a reasonable basis for believing the principal has died;
- actual knowledge of the incapacity of the principal or a reasonable basis for believing that the principal is incapacitated where the power of attorney tendered is a nondurable power of attorney;
- actual knowledge or a reasonable basis for believing that the principal was incapacitated at the time the power of attorney was executed;
- actual knowledge or a reasonable basis for believing that the power of attorney was procured through fraud, duress or undue influence;
- actual notice, pursuant to subdivision three of this section, of the termination or revocation of the power of attorney; or
- the refusal by a title insurance company to underwrite title insurance for a transfer of real property made pursuant to a major gifts rider or non-statutory power of attorney that does not contain express instructions or purposes of the principal.ii
Aaron E. Futterman, CPA, Esq. is a partner in the law firm of Futterman & Lanza, LLP with offices in Smithtown, NY and clients throughout Suffolk, Nassau, Queens, Brooklyn, Bronx, Richmond, New York, Westchester and Rockland Counties. He concentrates his practice to Elder Law, Medicaid Planning, Medicaid Applications, Estate Planning, Probate, Estate Taxes, and Estate Administration.