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a financial powers of attorney document

Financial powers of attorney are useful but only go so far

by Legacy Plan | May 6, 2016

A complete estate plan includes financial and healthcare powers of attorney in the vast majority of situations. However, one should be aware that financial powers of attorney are not without their limitations and difficulties. One way to escape some of these challenges is by using a revocable living trust, as financial institutions are, in many cases, less likely to refuse to recognize a successor trustee acting under the authority of a trust agreement that an agent acting under a power of attorney.

Power of attorney is an important part of almost every estate plan. A financial power of attorney is a document where you, as the document's creator (known as the “principal”), name someone else (your “agent”) to make certain decisions about your assets on your behalf. This document can give your agent these powers from the moment you sign it or only after you have become mentally incapacitated and cannot make those decisions for yourself.

While these powers of attorney are vital pieces to the estate planning puzzle, they are not, however, without their challenges, as the New York Times recently reported. In an Aug. 22 article entitled “Power of Attorney Is Not Always a Solution”, the Times explained that, with a power of attorney, “when it fails, the consequences can be nothing short of disastrous.”

One of the problems with powers of attorney is that many financial institutions refuse to recognize them, meaning that, even when presented with a properly executed power of attorney document, the institution still refuses to give the agent access to, and control over, the principal's accounts. When this happens, the agent often has limited choices to break through this impasse except filing a legal challenge, which can be expensive and time consuming.

One estate planning technique that may help avoid some of these dilemmas and serve you better is using a revocable living trust. With a living trust, you put your assets into the trust while you are alive and competent. From a legal perspective, your trust owns those assets, so transitioning their control and management from you to the person you've designated requires only documentation that the person seeking that power is the properly appointed successor trustee and proof that they are entitled to begin acting on behalf of the trust (such as a death certificate in the event of your passing or doctors' notes stating that you've become mentally incapacitated.)

As the article correctly points out, using a trust reduces the risk of having a problem with the bank. One attorney explained it to the Times this way, “Banks are more comfortable with this … What you're doing is getting a jump on the legal system designed to handle these things.” In order for this plan to work, though, you must make sure you fill out the necessary paperwork to place the asset into the trust. Each financial institution may have its own transfer documents it may require to complete the transaction.

How do I create an estate plan?

There are numerous options and scenarios to consider when developing an estate plan that protects your legacy and achieves your objectives, and important decisions should be made with the advice of qualified lawyers and financial experts. Membership with Legacy Assurance Plan provides members with valuable resources and guidance to develop comprehensive estate plans that take life's contingencies into consideration and leave a positive impact for generations to come. Legacy Assurance Plan members also receive peace of mind that a team of trusted, experienced professionals will assist them in developing legal, financial and tax strategies that will meet their needs today and for years to come through periodic reviews.

This article is published by Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at

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