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Mental Capacity of POA

Question: We had a customer who had a power of attorney on her account, and we recently got a letter from her attorney, with her signature notarized, revoking the power. We marked her signature card, and rather than police the account constantly, we asked her to come in and open a new account so we wouldn't get burned by inadvertently paying checks again with the POA's signature. She was annoyed with us, and closed her account and went to another bank in town to open her account. I had occasion to speak to the security officer over there and she said the woman had been giving them trouble in the branch. (She said she wished we had kept her!) And that she wanted to put a power of attorney on the account she opened over there and before the bank would honor her request she stated they would need a letter from her physician attesting to her mental capacity. Can we really require that?

Answer: The answer to this one actually depends on the state where the bank is located, and the policy of the bank. Not every bank MUST accept a Power of Attorney. They can, in their policy, reserve the right to refuse a power - EXCEPT in some states, where the POA is registered with a state office, and the only way it can be changed is through the state office - New Jersey is one. If a financial institution is concerned that a depositor is being coerced or lacks the mental capacity to grant a power, it could, under unusual circumstances, request the kind of letter you refer to. I have had to ask for such letters when dealing with customers who wanted us to accept powers and the knowledge of the circumstances surrounding the request led us to believe our depositor was being forced to grant the power. We depended on the people in branch office to advise us in such matters, as they knew their customer. Bankers are not qualified to attest to mental capacity. It's a wise precaution, in the case of doubt, taken in order to protect the customer and the financial institution. In the few instances where I exercised the right to ask for such a letter, we were able to save the customer from being exploited by unscrupulous relatives. The alternatives are a little easier now with the ability to contact social services to step in and help.

Having so said, please be aware that neither the BANKERS' HOTLINE nor I give legal advice. The above is only from past experience and observations and is not intended to advise you in any way.

Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 8, 8/05

First published on 08/01/2005

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