Financial institutions

Financial institutions and the problems they cause with your aging parents’ funds

The legal profession invites you to do your estate planning. They draft wills, trusts, and empowering documents such as enduring powers of attorney and advance health care directives. Responsible people with means usually achieve this. What they and the lawyers they hire apparently don’t think about is what happens when the client, who may be your aging relative, loses their independence and has to depend on who they designate on the document.

The agent or “de facto attorney”, as it is called on paper, is supposed to act on behalf of the aging person. The broad authority given to them is mostly standard, and state legislatures have approved the wording of these documents. You’d think things would go well when the agent, who could be YOU, goes to dad’s financial institution to access funds after dad lost his ability to manage his money on his own. What we are finding is that it is not going smoothly. Banks and financial institutions can and do block access to funds held by the disabled senior, even when the senior’s designated agent shows up with the proper legal documents in hand.

Here is a concrete example.

Jason’s daughter Joanne, 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 in a financial institution for decades and had a seven-figure portfolio there. She received letters from both of her doctors saying he had the ability to appoint Joanne as her agent and should no longer handle the finances on his own. She had the notarized lasting power of attorney document that her father had signed. Everything looked good.

But when she approached the financial institution so she could pay Jason’s taxes, they refused to allow her access to any of her invested funds. Worse still, they simultaneously blocked his father’s access to his own funds, on the pretext that he had dementia! His dementia was mild at this time and he was still able to make decisions. He has memory lapses but could manage to pay his bills with Joanne reminding him and covering for him when he forgot. Now the accounts were frozen and Jason could no longer meet his basic living expenses. It was horrible. The institution treated Joanne like a criminal. They told him it was their “policy” not to allow him access because they did not like the wording of the legally prepared and fully valid document his father had signed. They told her that if she didn’t like the account being frozen, she could go to court and put her father in conservatorship. What they failed to recognize was that initiating guardianship proceedings would destroy the relationship she had with her father. This is a public instance. It would cost several thousand dollars that Joanne didn’t have (she’s a teacher) and no court was going to put Jason under conservatorship because he was still quite functional and eloquent. 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 an unstable man with an explosive temper. She didn’t want to excite him by telling him about her financial institution’s ridiculous refusal in its 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.

The institution touts in media advertising how much it cares about its customers. Their behavior with Joanne demonstrated the exact opposite. They cared about keeping Jason’s money. They didn’t care about the effect of preventing him and Joanne from using his own money for his own purposes. This dilemma lasted for weeks. The situation threatened to become an ugly fight that Joanne did not want.

When we consulted Joanne at, we came up with a strategy designed to bring the institution’s legal department to their senses. At last report, they relented and expressed their willingness to accept Joanne’s lasting power of attorney and unfreeze the accounts. No court was involved. If they allow her access, you can be sure that she will immediately transfer Jason’s millions to a friendlier institution and close any accounts he had at the original institution. The account manager was fired. Lost management fees. We hope their inexcusable conduct was worth it to the institution.

Takeaway meals:

If you have an aging parent, spouse or other loved one and you are the Designated Agent on the Durable Power of Attorney (DPOA) for finances, contact the bank or institution where the money from your close is retained. There is a risk for anyone that we will one day lose our independent decision-making over finances. Find out if they anticipate a problem with you/the agent using the DPOA that their account holder signed as part of their estate plan. Show them. Seek advice from their legal department, for this is the source of the resistance of these misguided financial institutions. If they refuse to give you an opinion that such a document is acceptable, persuade the account holder to run, not walk, to transfer the funds to a different, more accepting bank or institution. They exist. Joanne has already chosen one. You don’t want to be forced into Joanne’s position of being locked out as she has to pay dad’s bills for everything from assisted living to income taxes. By locking out both the account holder and his agent, his named daughter had an immediate result: no one could access Jason’s money.

I’m unlikely to write about this if it was an isolated incident. It’s not. In 15 years of consulting with families on, we have seen this type of behavior from financial institutions, time and time again. They take strong positions against their own account holders, probably out of fear that the institution will be sued by an unknown person if they allow the appointed agent to do the work the agent is charged with doing. It doesn’t make legal sense, but it persists in the industry. The result is horrific stress for the officer, usually a family member of the disabled senior. Nor does it make legal sense to attempt to force the account holder into guardianship, for no reason other than the satisfaction of the bank’s legal department. It is not the financial institutions that decide who is suitable for guardianship and who is not. They are not the ones who bear the high cost of attempting guardianship when no one but the bank thinks it is reasonable to do so. They are not the ones who have the right to impose such heavy consequences on any family.

The best way to thwart this terribly unfair policy that persists in financial services is to test the concept of your aging parent’s legal document first. When you show them a document that you may need in the future and there is no clear answer to your request as to whether they will accept it, it is a “no”. Move the money from there while the eldest still has the ability. Otherwise, you might be stuck, just like Joanne and Jason are right now.

I keep 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 prepared to follow the DPOA law in every state. They are the ones who deserve the business. Consider this an early warning of a problem you may not have known existed. Keeping an aging parent’s invested funds somewhere that will treat the legally appointed agent with respect is the best way to avoid a nightmare like Joanne faced.