Consider this scenario: Betty has stayed at home for three years, taking care of her elderly mother, Claire. Claire has maintained her checking account for many years at a local bank, and she has always written her own checks to pay her household bills. However, due to a recent stroke, Claire is no longer able to do handle her finances. Fortunately, Claire has signed a Power of Attorney naming her daughter Betty as her agent, or attorney-in-fact, to sign on her accounts and other legal documents.

Betty takes her mother's Power of Attorney into the bank and asks to be given authority to sign checks on her mother's account and to access her mother's safe deposit box to retrieve her will and other important documents. To Betty's dismay and frustration, the bank officer declines to honor the Power of Attorney and tells Betty she must go to court and be appointed conservator or guardian for her mother before the bank will agree give her access to the account and safe deposit box. Betty learns that conservator proceedings are expensive and can take months to complete. In the meantime, the bills would go unpaid.

This scenario is not uncommon. Even when powers of attorney appear to be properly signed and notarized, banks and other financial institutions -- faced with risks of lawsuits for accepting fraudulent, forged, or revoked powers of attorney -- are understandably cautious when presented with a Power of Attorney. As customers, we would hope that our own bank, for example, would not simply open our own accounts to anyone who came in the door flashing an official looking Power of Attorney. On the other hand, banks typically want to provide good service to their customers, including accommodating the use of the a Power of Attorney in those situations where we truly need help in managing our accounts.

The fact remains that Hawaii law does not require a financial institution to honor a Power of Attorney, and there is no blanket rule on when a Power of Attorney will be accepted. Most financial institutions in Hawaii have some sort of policy or standard operating procedure in evaluating whether to accept or reject a Power of Attorney. For instance, one large Hawaii bank has a policy that requires its employees to consider the following factors, among others, in evaluating whether to honor a Power of Attorney:

1) Is the Power of Attorney still valid under its terms?

2) How old is the Power of Attorney?

3) What is the nature and dollar amount of the proposed transaction?

4) Is the principal (the giver) incapacitated?

5) Does the signature on the Power of Attorney match the customer's signature?

6) Does the Power of Attorney specifically allow the attorney-in-fact (agent) to deal with bank accounts or other bank transactions?

7) Is the attorney-in-fact well known to the bank personnel (i.e., a good customer) ?

The reasons for most of these screening questions are obvious. If, for example, a well known customer with her own accounts at that bank is presenting the Power of Attorney then the bank may have greater confidence that the Power of Attorney is legitimate. On the other hand, if the presenter of the document is requesting to withdraw the entire balance of another’s account using the Power of Attorney, the decision whether to honor it should be scrutinized more closely by the bank. However, even after making its evaluation and finding no obvious red flags, a Hawaii financial institution may still simply refuse to honor the Power of Attorney, with no explanation. While some states have laws protecting financial institutions when a Power of Attorney is accepted in good faith, Hawaii does not have such a protective law in place for its financial institutions.

All this begs the question, What can be done to give greater assurance that an individual's Power of Attorney will be accepted? Here are a few pointers that a customer should consider in creating a Power of Attorney:

1) Consider using the services of an attorney in preparing a Power of Attorney. Hawaii has no statutory form for powers of attorney, and a well drafted Power of Attorney will meet many of the criteria desired by financial institutions in their policies.

2) Make sure the Power of Attorney is Adurable@, meaning that it is designed to remain in effect even after the giver becomes incapacitated.

3) If possible, include specific information in the Power of Attorney that will make it clear what accounts are to be accessible by the attorney-in-fact.

4) Decide whether to make the Power of Attorney effective immediately, or effective only upon incompetency of the principal (known as a Aspringing@ Power of Attorney because it only Asprings into effect upon one's incompetency).

5) Consider taking the completed Power of Attorney to the financial institution before it is needed to make it clear that it should be honored when later presented by the named attorney-in-fact.

6) Check to see if the financial institution provides its own form of Power of Attorney for account holders.

7) Update a Power of Attorney every three years or so to keep it from becoming Astale.

Even if one has made all possible preparations, realize that there are some things a Power of Attorney cannot do. A frequent misconception is that a Power of Attorney will allow the attorney-in-fact to access and transfer assets after the principal has died. By law, however, all powers of attorney cease to be effective when the principal dies. Also, powers of attorney do not provide authority to make medical decisions for the principal. That authority must be given in a separate Advance Health Care Directive. Generally, a Power of Attorney will not allow the attorney-in-fact to:
1) open new accounts or add himself or herself as a joint owner on existing accounts;
2) write a will or trust for the principal; or
3) control trust or corporate assets. These limitations highlight the importance of having other estate planning documents in place, such as a last will and testament, an Advance Health Care Directive, appropriate corporate resolutions, or a trust.

Consider this alternate scenario: Before her stroke, Claire pre-advised her bank that she has a Power of Attorney in place for her daughter=s use and she has already provided a copy of it to her bank. The Power of Attorney was signed recently, within the past year. It specifically authorizes Betty to sign on accounts at her mother's bank. The Power of Attorney provides that it will remain effective even if Claire is incompetent, and adds that a written statement from Betty is all that is needed to make it effective. Under these new circumstances, the chances are high that Claire's bank will honor her Power of Attorney at the moment it is really needed.

Darl C. Gleed, Attorney 75-5995 Kuakini Hwy., Ste. 432 Kailua-Kona, HI 96740 (808) 329-6600 gleedlaw@gmail.com

1. Hawaii is a "Separate Property" State, which generally means that at death assets in your sole name will pass to those you have designated in your will. However, a surviving spouse may elect to take a percentage of your estate, regardless of what your will says -- including probate assets, insurance, trust property -- depending upon the number of years of marriage. After 15 years of marriage, the spouse may elect a full 50% of your estate. Certain assets are excluded and a rights of a spouse may be waived in advance by agreement, including a prenuptial agreement.

2. If you move to Hawaii from a community property state, the community property assets you bring into Hawaii may retain their status as community property, but only if you are careful in your planning. Maintaining community property generally affords a more favorable capital gains treatment for appreciated property after one spouse dies.

3. In Hawaii, if non-real estate assets in a person's sole name at death do not exceed $100,000 (not counting the value of any autos), there is no need for a probate, and the assets and any autos may be collected by the rightful beneficiaries or the person named in a will as the personal representative using a simple Affidavit and a certified copy of the death certificate.

4. Hawaii law allows a married couple to hold any property, real or personal, as Tenants by the Entirety. This type of ownership has rights of survivorship for a surviving spouse. Hawaii allows any type of property, real or personal, to be titled in this tenancy. Property held by the Entirety is deemed to be owned by the marital unit. Consequently a creditor seeking recovery against only one spouse will in most cases be unsuccessful in attaching any of the property held in this form.

5. Although Hawaii has a state tax on income, qualified retirement plan income is exempt from state taxation, making it easier to retire in paradise.

6. In 1999, Hawaii adopted a modified version of the Uniform Health-Care Decisions Act. This law combined the features of a "living will" with those of a durable power of attorney for health care decisions, creating a vehicle for a customized Advance Health-Care Directive.

Please, click here for a sample version of a Hawaii Advance Health-Care Directive
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7. Hawaii has a complicated system of land transfer and recording. All recording of deeds and other related documents is done at the State level, either in the Bureau of Conveyances system, in the Land Court system, or in both systems. As such, there are no statutory deed forms and a Hawaii attorney will likely be required to assist in preparation of transfer documents to a revocable trust or to another person or entity. Similarly, there are no statutory powers of attorney in Hawaii.

8. Hawaii has only a "piggy-back" estate tax, meaning that it merely takes the maximum amount allowable as a tax credit for state taxes on the federal estate tax return, and does not impose any additional estate tax on a person's estate at death. As the law now stands, no Hawaii estate tax will be due in any event, as Hawaii has not "decoupled" from the federal estate tax law.

9. If a non-resident of Hawaii has died owning real estate in Hawaii, in most cases the property may be transferred without an ancillary probate, through a simple Acknowledgment of Authority procedure wherein the personal representative in the home state is granted authority to act in Hawaii.

10. Revocable and irrevocable trusts have been around for many years in Hawaii and assets held in trusts will generally avoid probate. If a probate is required to transfer property in Hawaii, the relatively new changes to the Hawaii Probate Code provide for a less expensive and more efficient probate or intestate administration. Attorney's fees are no longer based upon a statutory percentage of the value of the estate, and must be reasonable as reviewed by the Court. Most proceedings are handled on an informal basis, without court hearings.