Power of Attorney Limitations
Answers by John Burnett and Mary Beth Guard, BOL Gurus
Question: Can an attorney-in-fact use the POA to open a new account for the principal? Especially a new account naming the attorney-in-fact as a secondary or joint account holder?
Answer by: John Burnett, BOL Guru
BIO AND CONTACT INFO
I have heard of some jurisdictions in which a POA must be accepted. I'm glad I don't work in one of these places.
Opening a new account in a principal's name based solely on a POA, without knowing or dealing with the principal, is fraught with potential problems. A lot will depend on how well you know the attorney-in-fact.
Opening an account that is jointly owned by the attorney-in-fact without the presence of the principal is even more dicey.
Answer by: Mary Beth Guard, BOL Guru
BIO AND CONTACT INFO
Unless the power of attorney specifically grants the attorney-in-fact the power to make gifts from the principal's property -- or unless your state laws or court decisions would permit it -- the general rule is that it is not permissible. An attorney-in-fact is supposed to be managing the property for the use and benefit of the principal -- not enriching himself. If the AIF is allowed to name himself as a secondary or joint account holder, he is, in effect, trying to give the money to himself.
If the AIF is simply trying to open a new account solely in the principal's name, then your big concern is whether the transaction and the POA itself are legitimate. There have been instances where X steals checks made payable to Y. X then dummies up an official looking POA which purports to be from Y to X. He goes in and opens a deposit account using that document and deposits the stolen checks. He then uses his power as POA to write checks to himself or in payment of goods or services for his own benefit. Once Y discovers what has happened, he sues the financial institution under various theories, such as negligence. Don't let it happen to you.
First published on BankersOnline.com 6/17/02
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