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-Some cards, allow for joint accounts and signers and sometimes for more than one agent or signer -Cease at the death of
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Written by Gettechnical Inc. Produced by Financial Education and Development, Inc
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Instructor Deborah L Crawford Deborah Crawford is the President of Gettechnical Inc., a Baton Rouge based training company. She specializes in the deposit side of the financial institution and is an instructor on IRAs, BSA, Deposit Regulations and opening account procedures. She was formerly with Hibernia National Bank (now Capitol One) and has a bachelor’s and Masters degrees from Louisiana State University. She has 27 years of combined teaching and banking experience.
You should receive a state chart with this program with a link to your state statute. Before the program, if you cannot find your state power of attorney statute please email us. Any general comments made during this program are subject to your state statutes and legal counsel review. If you have any questions just email them to [email protected] or call us at 1-800-354-3051 The material used in this text has been drawn from sources believed to be reliable. Every effort has been made to assure the accuracy of the material; however, the accuracy of this information is not guaranteed. The laws are often changed without prior notice from the government. The publisher and the editor are not engaging in the practice of law or accounting. We are not responsible for the actions of your company's employees.
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WHAT IS A POWER OF ATTORNEY?
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A power of attorney (POA) or letter of attorney is a written authorization to represent or act on another's behalf in private affairs, business, or some other legal matter. The person authorizing the other to act is the principal, grantor, or donor (of the power), and the one authorized to act is the agent, donee, or attorney, or, in some common law jurisdictions, the attorney-in-fact. 4
TYPES OF POWER OF ATTORNEYS
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A power of attorney becomes ineffective if its grantor dies or becomes "incapacitated," meaning unable to grant such a power, because of physical injury or mental illness, for example, unless the grantor (or principal) specifies that the power of attorney will continue to be effective even if the grantor becomes incapacitated. This type of power of attorney is called "power of attorney with durable provisions" in the United States or "enduring power of attorney" elsewhere. In effect, under a durable power of attorney, the authority of the attorney-in-fact to act and/or make decisions on behalf of the grantor continues until the grantor's death. 6
(A) This power of attorney is not affected by my subsequent disability or incapacity. (B) This power of attorney becomes effective upon my disability or incapacity.
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In some U.S. states and other jurisdictions it is possible to grant a springing power of attorney; i.e., a power that only takes effect after the incapacity of the grantor or some other definite future act or circumstance. After such incapacitation the power is identical to a durable power, but cannot be invoked before the incapacity. 8
In many cases, when someone is serving in the military the customer will appoint an attorneyin-fact for a period of time. Military power of attorneys expire at a particular point in time.
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A specific power of attorney document allows an attorney-in-fact the right to do a specific act such as cash a check or close on a house.
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POWER OF ATTORNEY’S DOCUMENTS 11
Powers of Attorney
Agents, convenience signer or authorized signers
In house Powers of Attorney
Provided usually on financial institution signature card
Provided by financial institution
Usually restricted to one particular account and can only make transactions while owner is alive
Usually can act on more than one account, but not on all accounts. Must be revoked at the bank in person.
Out of house Powers of Attorney
Provided by customer
Can act as Power of Attorney document states and usually can be revoked many ways.
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Informal Power of Attorney’s Authorized Signers, Agents and convenience signers— usually on signature card and account agreement.
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-Created on the signature card contract -Usually can make “transactions” for the owner -Only typically sign on that one account -Cannot change ownership or do anything to benefit his or herself such as cashing a check made payable to authorized signer -In some cards, only allow one and only on individual accounts 14
-Some cards, allow for joint accounts and signers and sometimes for more than one agent or signer -Cease at the death of owner or owners -Usually appear in system as a memo and usually do not appear on the face of the checks of the owner -May have the language of durable versus not durable -Owner revokes by signing a new contract and removing the signer. 15
Sample: Individual with Agent – On some cards it is added on bottom 1 OWNERSHIP Individual Joint Trust/POD
2 TITLE Grandma
5 TAXPAYER IDENTIFICATION NUMBER
4 SIGNATURES (Access)
3 FEDERAL REGULATIONS
Grandma’s Signature Granddaughter’s Signature as Agent or Authorized Signer Grandson’s Signature as Agent or Authorized Signer 16
In-Bank Power of Attorney 17
-Document that attaches to the signature card contract -Allows for power of attorney on more than one Deposit account -May or may not allow more than one attorney-in-fact. -Ceases at death -Must be revoked in front of bank personnel on same document -May or may not be “durable” -Broader than the authorized signer or agent -Some states may not use these because the form of the power of attorney document is dictated by state law. 18
Formal Power of Attorney
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-Document usually drawn up by customer’s attorney -State law may dictate the form of the document -These come in all shapes and sizes -The documents may be complex and should be reviewed by bank’s legal counsel. -May be durable or nondurable depending on state law -Will dictate what the attorney-in-fact may or may not do 20
DEPOSIT HOT SPOTS
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#1 CIP: Who is the customer the grantor or the attorney-in-fact? Who do you identify? 22
1. Who is the “customer” when an account is opened by an individual who has power-of- attorney for a competent person who is the named owner of the account? The CIP rule provides that a “customer” generally is “a person that opens a new account.” 31 C.F.R. § Title X. When an account is opened by an individual who has power-ofattorney for a competent person, the individual with a powerof-attorney is merely an agent acting on behalf of the person that opens the account. Therefore, the “customer” will be the named owner of the account rather than the individual with a power-of-attorney over the account. By contrast, an individual with power-of-attorney will be the “customer” if the account is opened for a person who lacks legal capacity. 31 C.F.R. § Title X. (January 2004) 23
Who is the Customer?
If the owner is legally competent, your customer is the owner or owners.
If the owner lacks legal capacity and the power of attorney is durable, then the POA is your customer.
CIP the owner or owners CIP the Power of Attorney
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Scenario One: The customer and the power of attorney come in together. Who do you identify? Policy A. Your CIP says to identify owners Policy B. Your CIP says to identify both owners and signers. Scenario Two: The attorney-in-fact presents a durable power of attorney and the customer is in a nursing home. Can he or she open the account? And who would you identify? Does it matter what your CIP says? 25
Scenario One: Policy A: Identify both Policy B: Identify just the owner Scenario Two: If you find that the customer lacks legal capacity you can CIP just the attorney-in-fact. Just because owner is in nursing home does not mean he or she lacks legal capacity. If she or he is mentally competent then you are back to Scenario One but dealing with a customer who is not present. 26
#2 Power of Attorneys Policy and Procedure
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Some Procedures To Think About
1. Should Powers of Attorney be reviewed by legal counsel 2. Should we restrict to one power of attorney per customer? 3. On joint accounts, should all joint owners agree to the power of attorney on the account? 4. Should a power of attorney be able to change ownership to benefit him/herself? 28
Checklist for POA
All POA’s should be reviewed by legal counsel POA on file (stamp copy of an original document) Affidavit if your state requires CIP Report to IRS in SSN of owner Signature Card Account Styling: Styled as any personal account Account Ownership: Depends on ownership Government lists State law Issues
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#3 Formal POA--State Law Issues You will have received a supplement with LA law
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Out of House Powers of Attorney
Is it required to be filed at county/parish clerk’s office?
Yes/No
Is it required to be durable?
Yes/No
Do you have to have an affidavit signed by attorney-in-fact?
Yes/no
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#4 Power of Attorney What can they do and how many can you have? 32
Can the attorney-in-fact open an account? Can the attorney-in-fact close an account? Does a power of attorney act for both joint owners or only the one he or she has been appoint for? Can the owner of an account have more than one power of attorney and which one rules, if any? Or do the attorney-in-facts have to act together? Can a attorney-in-fact add him or herself to the account? 33
Sample: Power of Attorney
1 OWNERSHIP Individual Joint WROS Trust/POD
2 TITLE Bob Smith or John Smith
5 TAXPAYER IDENTIFICATION NUMBER
4 SIGNATURES (Access)
3 FEDERAL REGULATIONS
Bob Smith by John Smith POA John Smith
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Power of Attorneys #5 When do they cease? And does a court-ordered account overrule a power of attorney? What about endorsements?
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Death of grantor Appointment of a guardian—will usually rule over rule a power of attorney Revocation Time (military power of attorney’s) In community property states, divorce if between husband and wife
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Powers of Attorney Cease (Subject to state law) At the death of customer
Appointment of court by guardian
In some community property states, by divorce Revocation of the principal
By operation of contract, time, conditions, etc.
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How should fiduciary sign… Who are you acting on behalf of? Who are you?
What is the capacity?
• The attorney in fact is acting for someone • This is usually the owner of the account
• We need the attorney-in-fact’s name
• We need the job title • Power of Attorney • Attorney-In-Fact
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SAMPLE CHECK #1 Sally Smith has given a POA to her sister Hannah Smith. How should Hannah indorse the check? I
March 31, XXXX
X Sally Smith By Hannah Smith, Attorney-In-Fact
10.00
Sally Smith
Ten & ----------------------------------------------0/100
DO NOT SIGN/WRITE/STAMP BELOW THIS LINE FOR FINANCIAL INSTITUTION USAGE ONLY
Bill Smith
FEDERAL RESERVE B AND REGULATION CC
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Sample: Power of Attorney
1 OWNERSHIP Individual
2 TITLE Bob Smith 3 FEDERAL REGULATIONS
5 TAXPAYER IDENTIFICATION NUMBER
4 SIGNATURES (Access)
Bob Smith by John Smith, Attorneyin-Fact
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#6 Power of Attorneys On Formal Trust Accounts 41
Description A legal arrangement under which one person or institution (trustee) controls property given by another person (grantor, settlor or trustor) for the benefit of a third person (beneficiary). A trust is a device where legal title to the property and the right to control it are separated from the rights to receive benefits from it. The property transferred to a trust is called trust corpus or res. A trust can have formal valid legal document called a "Trust Agreement" or be created informally through the use of a signature card contract.
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Parties to a Trust • Grantor, settlor or trustor: The person who creates the trust. • Trustee: The person who manages the trust. Sometimes this is the same person as the settlor. The successor trustee is the person the settlor names to take over as trustee after the settlor's death (or, with a trust made jointly by a couple, after the death of both spouses). A successor trustee may also take over if the trustee is no longer able to act. The successor trustee cannot make changes to the trust since he/she was not an original creator of the trust. They serve in a fiduciary capacity and must act with prudence and strictly in accordance with the trust instructions. In an irrevocable trust the grantor and trustee will not be the same person and the trustee will also serve in a fiduciary capacity. 43
Parties to a Trust …….continued • Beneficiary: A trust beneficiary is a person or organization who is legally entitled to receive property under a trust. A primary beneficiary is a person who will benefit from the trust. An alternate beneficiary is a person who inherits property if a primary beneficiary dies before the person who made the trust. • Final Beneficiary: The person, people or institution(s) who receive the property in a marital life estate trust, after the life beneficiary of that trust dies. • Residuary Beneficiary: The residuary beneficiary of a trust for one person is that beneficiary who receives any trust property not otherwise given away by the trust document. The residuary beneficiary of a will is the beneficiary who receives any property the will writer owned that was not left to beneficiaries by the will or other method. 44
Broad Categories of Trusts • Living or Inter Vivos Trust: Created during the grantor's lifetime. Revocable: Settlor/grantor can change. Irrevocable: Settlor/grantor cannot change. • Testamentary Trust (all are irrevocable) Created at the death of the grantor.
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Customer (Grantor) creates a trust contract with an attorney
Grantor
Grantor puts assets in trust House Land Bank Accounts
Trustee takes care of assets in trust. When trustee dies successor trustee takes over.
Names Trustee
Trustee
Upon death of all trustees the successor trustee takes out assets and gives to beneficiaries according to the trust.
Successor Trustee
Beneficiaries
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Trustor / Settlor / Grantor
Beneficiary
Trustee Successor Trustees
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Trust are outside legal documents that name a trustee to manage the trust for them. The only way you can use a power of attorney of any format (authorized signers, agents or attorney-in-fact) is if: •The Trust explicitly permits •Usually that is reflected in the power of attorney document This is usually under “trustees powers and duties” in the trust. 48
The trustees can amend the trust to allow for another trustee. The trustees can amend the trust to allow for a power of attorney.
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#7 Power of Attorneys on UTMA and Social Security Accounts—No agents, authorized signers or attorney-in-fact 50
Under UTMA a custodian may want to set money aside for the minor as an irrevocable gift. – money belongs to the child – If the custodian withdraws any of the money it must be used for the benefit of the child. – Upon age 18 -21, the funds will be turned over to the child
Only one custodian and one child are allowed per account in most states. There are a few states which allow two custodians
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Custodian
Custodian
Custodian
Custodian sets up an account for a child at a bank.
BANK
Custodian makes deposits and withdrawals at the bank for the child
BANK
Custodian gives the child the money if any left at age dictated by state law 18-21
Child
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Description A Social Security account is an account for a person receiving Social Security benefits who is unable to act on their own behalf. The Social Security Administration has named a representative payee to act for the person. This can be for minor children or adults who are unable to act for themselves. The representative payee is the person with access to the funds and the other named individual on whose behalf they are acting is the actual owner of the account. 53
Social Security names the representative payee The representative payee is the signer There is no authorized signers, agent, or attorney-in-fact on these accounts. If the representative payee dies, then social security names a new representative payee.
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#8 Power of Attorneys On Estate Accounts and Guardianships/Conservators 55
Death of Customer Probate Assets
• Individual or Single party Accounts • Sole Proprietorships • IRAs with no beneficiaries • Joint WOROS Accounts
Need Letters of Testamentary or Letters of Administration and Death Certificate Appointing the Personal Representative, Executor or Administrator
Set up Estate Account
Non Probate Assets
• • • •
POD Accounts Living Trusts IRAs with beneficiaries JTWROS
Need Death Certificate
Pay Beneficiaries or Owners
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It is very rare that we see a court permit an attorney-in-fact, agent, authorized signer on a deposit relationship. The only state that pops to mind is Louisiana where there is a court-ordered power of attorney that can be applied for. Since the personal representative, executor, or administrator are appointed by the court. This duty is not usually permitted to be passed on to another. 57
#9 Power of Attorneys On Business Accounts 58
Business Accounts are unique and are governed by the resolution and the signature card. If a business wants to change signing authority we use the resolution and signature card to do that not a power of attorney. The only exception to that would be the sole proprietorship. 59
#10 Treasury Checks and Power of Attorneys
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Specific powers of attorney General powers of attorney Special powers of attorney Durable special powers of attorney Springing durable special powers of attorney Proof of authority Revocation of powers of attorney Optional use of forms
Checks indorsed by an attorney-in-fact must include, as part of the indorsement (endorsement), an indication of the capacity in which the attorney-in-fact is indorsing. An example would be: “John Jones by Paul Smith, attorney-in-fact for John Jones.” Such checks when presented for payment by a financial institution, will be paid by Treasury without the submission of documentary proof of the claimed authority, with the understanding that evidence of such claimed authority to indorse may be required by Treasury in the event of a dispute.
Notwithstanding any other law, for purposes of negotiating Treasury checks, all powers of attorney are deemed revoked by the death of the principal and may also be deemed revoked by notice from the principal to the parties known, or reasonably expected, to be acting on the power of attorney.
Optional use power of attorney forms are listed in the appendix to this part. These forms are available on the FMS website at: http://www.fms.treas.gov/checkclaims/ regulations.html.
FIVE TYPES OF PERSONAL POWER OF ATTORNEY FORMS General POA
Specific POA
Special POA
Durable Special POA
Springing Durable POA
Form 231
Form 232
Form 233
Form 233
Form 233
By individual
By individual
By individual
Payment of principal or interest on public debt
Must be executed after the issuance of the check, describing the check in full, may be used for the endorsement and collection of any check drawn on the U.S. Treasury.
Must name the attorney-in-fact and must recite that it is not given to carry into effect an assignment to the attorney-in-fact, or to any other person, of the right to receive the payments therein described.
obligations or obligations guaranteed by the U.S., tax refunds and payment for goods and services.
DEBORAH L CRAWFORD GETTECHNICAL INC 1-800-354-3051 [email protected] 66