Power of Attorney and Your Advisor: Keep Them Current

You signed the new power of attorney last spring. Your attorney has a copy, the kids have a copy, and there’s a folder somewhere in the house. Your advisor has the old one, if that.

Nobody skips this on purpose. Estate documents feel like they belong to the attorney, and the portfolio belongs to the financial advisor. But the custodian holding your accounts can only act on what it has on file, and what’s on file is often a version of your plans from several years ago.

A note on scope: we don’t provide legal or tax advice, so the documents themselves are a conversation for your estate attorney. What follows is about the part that lands on our side of the table.

Why does my advisor need copies of my updated estate documents?

The accounts answer to the paperwork on file, not to your intentions. If your power of attorney names a new agent, or your trust names a new successor trustee, the custodian and your advisor need the current documents to recognize the people you chose.

Consider what happens if the document on file names an agent who has since died, moved away, or fallen out of your confidence. The person you actually chose arrives with a document nobody has seen, at a moment when they’re probably already under stress. The custodian’s legal review starts then, not earlier.

An advisor who has read the current documents can also flag problems while you can still fix them. Language that’s too narrow about investment authority is the kind of thing worth catching before it matters.

What happens when someone presents a power of attorney the custodian hasn’t seen?

A power of attorney the custodian hasn’t yet seen gets reviewed, and review takes time. Custodians may route these documents to a legal or compliance team, which may ask for changes or additional documentation. Whether a document is accepted, and how quickly, varies by institution and by state.

How does fraud fit into this?

Fraud fits because the period when an agent is most needed is also the period when you’re most exposed. Cognitive decline, a hospital stay, or the loss of a spouse can all make a person easier to pressure, and the people applying pressure aren’t always strangers. They can be caregivers, new friends, or relatives.

Current documents on file give your advisor a baseline. We know who is authorized to act, who isn’t, and what an ordinary request looks like. A wire request from someone who doesn’t appear in documents an advisor holds is much easier to question than one from someone we’ve already met and verified.

There’s also a regulatory layer worth knowing about. FINRA rules allow member firms to place a temporary hold on a disbursement when they reasonably believe a vulnerable customer is being exploited, and they require firms to make reasonable efforts to get the name and contact details of a trusted contact person for the account. Those rules apply to FINRA member firms, which includes the broker-dealer holding your accounts, so how they work for you depends on where the accounts are held.

A hold is only as useful as the list of people the firm can call.

What’s the difference between a trusted contact and a power of attorney?

A trusted contact can be called. An agent can act. The trusted contact has no authority to move money or make decisions. They’re a person the firm can reach if it can’t reach you, is worried about you, or suspects something is wrong. An agent under a power of attorney, or a successor trustee, has legal authority within whatever the document grants.

Those are two separate decisions, and they don’t need to be the same person. Naming a trusted contact who isn’t your agent is one arrangement to consider, since it puts a second person in a position to notice something odd. It’s worth choosing on purpose instead of filling in whatever name goes on the account form that day.

Which changes should I tell my advisor about?

Anything that changes who can act for you or who receives what is something you should inform your advisor about. Here are some considerations:

• A new, amended, or revoked power of attorney
• A restated trust, or a change of trustee or successor trustee
• The death, divorce, or incapacity of anyone named in your documents
• A different trusted contact, or new contact details for an existing one
• New beneficiary designations on retirement accounts or insurance, which are often set by the account’s own forms, so a new will or trust doesn’t update them automatically
• A named agent who has moved, especially to another state
• Any concern about a family member’s or caregiver’s growing involvement in your finances

Send the signed, dated version, not a draft. If your attorney is the one with the final copy, a short note authorizing them to send it to us works fine.

Should my agent or successor trustee meet my financial advisor before they need to?

The first meeting between a person who has just become responsible for a parent’s accounts and an advisor they’ve never spoken with is not one anyone wants to have. A short introduction beforehand, even a phone call, means your agent knows who we are, where the documents are, and how to reach us. It doesn’t require sharing portfolio details.

Conclusion

A power of attorney gets used on the worst possible day, by someone who is probably grieving or frightened and has never dealt with a custodian’s legal department. You can’t make that day easy. You can make sure the document has already been through review, so any problem shows up while you can still fix it with a new signature.

If your documents have changed since you last sent us copies, send us the signed versions, and we’ll walk through who is on file and where the gaps are.

FAQ

Q: Does giving you a copy of my power of attorney give you authority over my accounts?
A: No. Authority over your accounts comes from your advisory agreement and the custodian’s account forms. A copy tells us who the document names and what it says.

Q: How often should we review who’s on file?
A: When a life event changes who’s involved, and as part of a periodic planning review.

Q: My agent lives in a different state than where I signed. Does that matter?
A: It can. State law governs how a power of attorney is created and honored, and custodians have their own requirements on top of that. Your estate attorney can speak to the law, and we can tell you what the custodian asks for in practice.

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Disclosures
This content is for informational purposes only and does not constitute financial, tax, or legal advice. Investment strategies involve risk and may not be suitable for every investor. Please consult your financial advisor, tax professional, or attorney regarding your specific situation. Watts Gwilliam & Company, LLC is a Registered Investment Advisor with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training.