MnCUN COMPLIANCE REFERENCE GUIDE

Transcription

1 MINNESOTA CREDIT UNION NETWORK MnCUN COMPLIANCE REFERENCE GUIDE DECEMBER 2012 Power of Attorney Guide Overview of Conservator/Guardianship Accounts Regulatory Summary 2012 Credit Union Report Deadlines 2013

2 TABLE OF CONTENTS Power of Attorney Guide Power of Attorney Overview What is Power of Attorney? Who are the Parties Involved with a POA? 10 The Principal 10 The Attorney-In-Fact 10 What types of POA are there? 10 Steps to Follow when Dealing with a POA 12 Does the Attorney-in-Fact Need to be a Member of the CU? Federally-Chartered Credit Unions State-Chartered Credit Unions What Documentation is Needed When Dealing with POA? Evidence of a POA POA Does Not Need to be Notarized Orignal POA or Certified Copy is Acceptable What Happens if the POA Does Not Conform to Minnesota Statute.. 12 Does the Attorney-in-Fact Need to Sign Membership Documentation? 13 How Should the CU Set Up an Account with Two Attorneys-in-Fact? 13 POA Does Not Require Attorneys-in-Fact to Act Jointly POA Requires Attorneys-in-Fact to Act Jointly 14 What Should the Credit Union Use for the TIN Does the CU Have to Follow CIP Procedures? Minnesota Statutory Short Form Power of Attorney What is the Minnesota Statutory Short Form? How Should a CU Handle the Minnesota Statutory Short Form? When Can a CU Refuse to Accept the Minnesota Statutory Short Form? 15 What Powers Does the Statutory Short Form POA Give? What Happens if the Power of Attorney Predates the Short Form?.. 16 Checklist When Presented With a POA A Quick Decision is Not Needed Verify that the Principal Validly Executed the POA Verify that the Attorney-in-Fact has Proper Authority Is the POA a Springing POA? Is the Principal Deceased? Has the POA Been Revoked? Has the POA Been Terminated? Deposits & Withdrawals How Should the Attorney-in-Fact Sign on the Account? What Should the CU do if There are Multiple Attorneys-in-Fact? POA Does Not Require Attorneys-in-Fact to Act Jointly POA Requires Attorneys-in-Fact to Act Jointly 18 1

3 Handling Share Drafts (Checks) How Should Share Drafts be Issued on the Account? How Should the Attorney-in-Fact Sign the Share Draft? What Should the CU do if There are Multiple Attorneys-in-Fact? POA Does Not Require Attorneys-in-Fact to Act Jointly POA Requires Attorneys-in-Fact to Act Jointly 19 Miscellaneous Power of Attorney Issues to Consider What Happens if an Attorney-in-Fact Abuses His/Her Power? Access to Account Information Voting Rights Termination of POA/Revocation of POA/Successor Attorney-in-Fact 22 How Does a Durable POA Terminate? How Does a Nondurable POA Terminate? What Happens When the Principal Dies? Can the Principal Revoke a POA? Death or Resignation of Attorney-in-Fact Successor Attorney-in-Fact How Should the CU Add a Successor Attorney-in-Fact? Lending Issues Does the Attorney-in-Fact have Authority to Borrow? Revocation of Power in Real Property Transactions Collection Remedies Involving POA Accounts Can a Credit Union Offset a POA Account? Is a POA Account Subject to Garnishment, Execution or Levy? 24 Can a POA Account be Subject to Ganishment, Execution or Levy Against the Attorney-in-Fact? Trustees Can a Trustee Delegate His/Her Powers Through POA? Attorney-in-Fact Wants to Serve as Trustee on a Trust Account 25 Military POAs Exhibit A: Statutory Short Form Power of Attorney Exhibit B: Minnesota Statute Overview of Conservatorship/Guardianship Accounts Conversatorship/Guardianship Accounts What is the Difference Between a Conservatorship and Guardianship? 47 Overview of Conservatorships What is a Conservatorship? What Power Does the Conservator Have? Can There be More Than One Conservator? What Happens if the Conservator(s) Can No Longer Serve? Can a Conservator Delegate His/Her Powers? What is the Difference Between a Private vs. Public Conservatorship? 50 Setting up Conservatorship Accounts What is a Conservatorship Account?

4 Is a Conservatorship Account Eligible to be a Credit Union Member? 51 Federally-Chartered Credit Unions State-Chartered Credit Unions Checklist for Setting up the Conservatorship Account Evidence of Conservatorship Account Forms Taxpayer Identification Number Converting Existing Accounts CIP Identification and Verification Operation of a Conservatorship Account Powers of Conservatorship Are There Any Restrictions on What the Conservator Can Do? 53 Existing Accounts & Safe Deposit Boxes Belonging to Conservatee 53 How Should the CU Handle Existing Accounts? How Should the CU Handle Existing Direct Deposits? What Should the CU do with the Conservatee Safe Deposit Box? 53 Signing Account Documents How Should the Conservator Sign Account Documents? Account Statements Where Should the Credit Union Mail Account Statements? Does the Conservatee Still Have Access to His/Her Acct. Info.? 54 Share Drafts How Should the Credit Union Issue the Account's Share Drafts? 54 How Should the Conservator Sign a Share Draft? Lending Can the Conservator Borrow Money? Voting Rights Does the Conservatorship Account Have a Right to Vote? Garnishments & Levies Can a Conservatorship Account be Garnished? Can the Credit Union Exercise the Right of Setoff? Abuse of Power of Conservator What Happens if a Conservator Misappropriates Funds? Termination of Conservatorship How Does the Conservatorship Terminate? Restoration to Capacity Death of Conservatee Death, Resignation or Removal of Conservator Successor Conservator Overview of Guardianships What is a Guardianship? What Power Does the Guardian Have? Can There be More Than One Guardian? What Happens if the Guardian(s) Can no Longer Serve? Can a Guardian Delegate His/Her Powers? What is the Difference Between a Public vs. Private Guardianship? 59 3

5 Setting up Guardianship Accounts What is a Guardianship Account? Is a Guardianship Account Eligible to be a CU Member? Federally-Chartered Credt Union State-Chartered Credit Union Checklist for Setting up the Guardianship Account Evidence of Guardianship Account Forms Taxpayer Identification Number Converting Existing Accounts CIP Identification and Verification Operation of Guardianship Account Powers of Guardian Are There Restrictions on What Guardians Can do? 62 Exisiting Accounts & Safe Deposit Boxes Belonging to Ward 62 How to Handle Existing Accounts? How to Handle An Existing Safe Deposit Box? Signing Account Documents How Should the Guardian Sign Account Documents? 62 Account Statements Where Should the CU Mail Account Statements?.. 62 Does the Ward Still Have Access to Account Info.? 63 Share Drafts How Should the CU Issue the Account's Share Drafts? How Should the Guardian Sign a Share Draft? Lending Can the Guardian Borrow Money on Behalf of the Guardianship? 65 Voting Rights Does the Guardianship Account Have the Right to Vote? Guardianship & Levies Can a Guardianship Account be Garnished? Can the CU Exercise the Right of Setoff? Abuse of Power by Guardian What Happens if a Guardian Misappropriates Funds? Termination of Guardianship How Does the Guardianship Terminate? Restoration of Capacity Death of a Ward Death, Resignation or Removal of Guardian Successor Guardian Regulatory Summary 2012 Deposit Accounts Financial Crimes Enforcement Network (FinCEN) Identifying Account Takeover Activity

6 FBAR Filing Deadline Definition of Motor Vehicles for CTR Exemptions CTR Exemption for Payroll Customers Determining Eligibility for CTR Exemptions FinCEN Guidance of CTR Aggregation for Businesses Regulation D Regulation D Maintainence Periods Annual Regulation D Reserve/Reporting Adjustments Regulation J Debit Card Interchange Fees & Routing International Remittance Transfers CFPB Remittance Rule Safe Harbor List IRS Mileage Reimburement Rate Reporting Interest Paid to Nonresident Aliens in Lending Foreclosures Handling of Foreclosed Properties Fed Guidance on Discontinuation of Foreclosure Proceedings 77 Congress Extended SCRA Foreclosure Protections New Standard Short Sale Guidelines for Fannie and Freddie 78 Regulation Z Regulation Z Renumbering CFPB Bulletin on Payments to Loan Originators Examination Procedures CFPB Issues Mortgage Origination Exam Procedures Department of Housing & Urban Development HUD Extended Waiver of "Anti-Flipping" Regulation Updated Equal Housing Poster HUD Revised Expiration Date on SCRA Notice Regulation C CFPB Final Rule Amending Reg C Commentary SAFE Act CFPB Issues SAFE Act Exam Procedures OCC SAFE Act Exam Procedures CFPB Clarified State Reciprocity in MLO Licensing NMLS Increased Individual Processing Fee Mortgage Fraud FinCEN Advisory on Mortgage Loan Fraud Joint Fraud Issued to Armed Services on Mortgage Assistance 81 FinCEN Reports Drop in Mortgage Fraud SARs FinCEN Study Assessing Title & Escrow Suspicious Acitivity 82 Rental of Residential Other Real Estate Owned Properties Consumers' Rights Under the Holder Rule Minnesota Law Adjustment Made to Minnesota Anti-Deficiency Statute

7 Commerce Adjusted Maximum Delinquency Fee Standard Flood Hazard Determination Form NCUA Operational Changes Corporate Credit Unions Interest Rate Risk Technical Amendments Troubled Debt Restructurings RegFlex Supervisory Coordination Federal Credit Union Interest Rate Ceiling National Supervision Policy Manual Miscellaneous Financial Crimes Enforcement Network (FinCEN) New CTR and SAR FinCEN Required Electronic Filing for All BSA Reports Test Site for New CTR and SAR FinCEN Guidelines on Foreign MSBs FinCEN Advisory on SAR Confidentiality Requirements FinCEN Issued Two Financial Task Force Advisories FinCEN Advisory on Tax Refund Fraud Administrative Ruling Regarding Money Services Buisiness Rule 91 FinCEN Administrative Ruling on Prepaid Cards FinCEN Administrative Ruling on Information Sharing FinCEN Tehnical Specifications for New SAR, CTR and DOEP 92 Filling of SARs Relating to Third-Party Payment Processors. 92 FinCEN Alert on and Telephone Scams Office of Foreign Assets Control Sanctions on Transnational Criminal Organizations OFAC Amended Iranian Transactions Regulations OFAC SDN Data Production System OFAC Action Against Members of Sinaloa Cartel OFAC Updated Iran Rules Federal Financial Institutions Examination Council (FFIEC) FAQ on Interest Rate Risk Management FFIEC Issued Revised TSP Booklet and Guidelines National Labor Relations Board Poster Consumer Financial Protection Bureau CFPB Bulletin Regarding Treatment of Confidential Info CFPB Rule on Investigations CFPB Final Rule on Adjudication Proceedings CFPB Rule on State Official Notification CFPB Monitoring of Third-Party Service Providers CFPB Rule to Protect Priviledged Information CFPB Rule Regarding Credit Reporting Agencies CFPB Advisory on Scholarships and Student Loans CFPB Released Exam Procedures for Consumer Reporting. 97 6

8 CFPB Began Supervising Debt Collectors U.S. Treasury Department Discontinuance of Savings Bond Redemption Fees Treasury Department Issued Update on Yemen Treasury Dept. Audit Report on FinCEN's BSA Program Financial Action Task Force FATF Revised Anti-Money Laundering Recommendations Federal Trade Commission FTC Issued Advice on Tax-Related Identity Theft FTC Guide on Protecting Personal Information Telemarketing Rules for Autodialed and Prerecorded Calls OCC Guidance on Natural Disasters and Other Emergencies Payment Card Industry Security Standards PCI Security Standards Council Issued Mobile Guidance Changes Effective in Debit Card Interchange Fee & Routing Regulation Z Exemption Threshold HOEPA Disclosure Threshold Adjusted Corporate Credit Union Rule Credit Union Report Deadlines 2013 Internal Revenue Service NCUA Minnesota Department of Commerce Miscellaneous

9 This guide is intended to provide credit unions with useful information regarding power of attorney, conservatorships, guardianships, the major regulatory changes that occurred in 2012, and a brief summary of report deadlines that apply to credit unions. The material outlined in this guide is intended to provide credit unions with useful information regarding the Minnesota and federal requirements for formulating their credit unions particular policies and procedures. It is distributed with the understanding that the Minnesota Credit Union Network is not engaged in rendering legal, accounting, investment or other professional advice and this information should not be relied upon or substituted for the same. Such advice should be sought from your attorney, certified public accountant or other appropriate professional. 8

10 Minnesota Credit Union Network Power of Attorney Guide A Comparison of Rules, Regulations & Laws 9

11 POWER OF ATTORNEY OVERVIEW WHAT IS A POWER OF ATTORNEY? A Power of Attorney (POA) is the name given to a legal document that is used by a competent adult, known as the principal, to appoint another person or an authorized corporation, known as an attorney-in-fact, to act as the principal s agent. 1 Although a POA is not a form of credit union account, it may authorize access to a member s account by a person not named on the account, either as an owner or an authorized signer, or authorize an individual or authorized corporation to transact business on behalf of the member. A POA is created and governed by statute. POAs can be very narrow and specific, very broad, or somewhere in between. The credit union should check the provisions in the specific POA to determine what authority is granted. WHO ARE THE PARTIES INVOLVED WITH A POA? The Principal A principal is a competent adult who has designated another person or an authorized corporation as the person s attorney-in-fact by a written POA. A principal also includes a guardian or conservator appointed for the principal. 2 The Attorney-in-Fact An attorney-in-fact is a person or authorized corporation designated by a competent adult, known as the principal, to act as the principal s agent through a validly created POA. 3 What types of POAs are there? Durable Power of Attorney A POA is durable if it contains language such as This power of attorney shall not be affected by the incapacity or incompetence of the principal or This power of attorney shall become effective upon the incapacity or incompetence of the principal, or similar words showing the intent of the principal that the authority conferred is exercisable regardless of the principal s later incapacity or incompetence. 4 A durable POA terminates on the earliest of the following instances to occur: 1. The death of the principal; 2. The expiration of a date of termination specified in the POA; or 3. In the case of a POA to the spouse of the principal, upon the commencement of proceedings for dissolution, separation or annulment of the principal s marriage. 5 1 Minn. Stat (2011). 2 Id. 3 Id. 4 Minn. Stat (2011). 5 Minn. Stat (2011). 10

12 Thus, a durable POA remains in effect even if the principal becomes incompetent or incapacitated. 6 Nondurable Power of Attorney A nondurable POA is any POA that does not contain the durable POA language above. Unlike the durable POA, a nondurable POA will terminate upon the incapacitation or incompetence of the principal. The nondurable POA terminates on the earliest of the following instances to occur: 1. The death of the principal; 2. The incapacity or incompetence of the principal; 3. The expiration of a date of termination specified in the POA; or 4. In the case of a POA to the spouse of the principal, upon the commencement of proceedings for dissolution, separation or annulment of the principal s marriage. 7 Springing Power of Attorney A springing POA is one that goes into effect on a certain date or upon the existence of certain conditions. For example, a POA may be written so that it takes effect when two doctors certify in writing that the principal is incompetent or incapacitated. A springing POA allows the principal to prepare for potential problems, yet avoid giving anyone else authority to deal with his/her property until a specified future point in time. When presented with a springing POA, the credit union should require any appropriate documentation to verify that the springing POA is in effect. 6 Id. 7 Minn. Stat (2011). 11

13 STEPS TO FOLLOW WHEN DEALING WITH A POA DOES THE ATTORNEY-IN-FACT NEED TO BE A MEMBER OF THE CREDIT UNION? Federally-chartered credit unions (FCUs) Federally-chartered credit unions (FCUs) may accept a POA with respect to a member s account. The attorney-in-fact need not be a member of the FCU. State-chartered credit unions (SCCUs) State-chartered credit unions (SCCUs) may accept a POA with respect to a member s account. The attorney-in-fact need not be a member of the SCCU. WHAT DOCUMENTATION IS NEEDED WHEN DEALING WITH A POA? Evidence of the POA Before giving an attorney-in-fact authority to transact business on behalf of a member, the credit union must acquire proof that the member has actually created a POA. To be valid, a POA must be dated and signed by the principal. 8 POA does not need to be notarized A POA need not be notarized unless the signature is made by someone else on behalf of the principal or is made by a mark. 9 A written POA that is dated and purports to be signed by the principal named in it is presumed to be valid. The credit union may rely on this presumption, unless it has actual knowledge that the POA was not validly executed. 10 Original POA or certified copy is acceptable A certified copy of a POA has the same force and effect as an original POA bearing the signature of the principal. A copy of a POA may be certified by an official of a state or of a political subdivision of a state who is authorized to make certifications. The certification shall state that the certifying official has examined an original POA and the copy and that the copy is a true and correct copy of the original POA. 11 WHAT HAPPENS IF THE POA DOES NOT CONFORM TO MINNESOTA STATUTE ? In addition to a written POA executed in accordance with Minnesota Statutes Chapter 523, a written POA is a validly executed POA if it is validly created pursuant to: 1. The law of Minnesota as it existed prior to the enactment of Minnesota Statutes to and it was executed prior to Aug. 1, ; 8 Minn. Stat (2011). 9 Id.; Minn. Stat (2011). 10 Minn. Stat (2011). 11 Minn. Stat (2011). 12 Minnesota Statutes Chapter 523 was enacted in August Thus, the current statute recognizes that if the credit union is presented with a POA that was executed prior to August 1984, the POA would not need to comply with the statutory requirements of Chapter 523 to be 12

14 2. The common law; or 3. The law of another state or country. 13 Thus, a credit union may accept such a POA and allow the attorney-in-fact to transact business as provided for in the POA. A credit union that has relied upon a validly created POA is not liable to the principal, to the heirs and assigns of the principal, or to any representative of the estate of the principal if: 1. The credit union has obtained the signature of the attorney-in fact; 2. The credit union has not received actual notice of the following: a. That the POA has been revoked; b. That the principal has died; or c. In the case of a nondurable POA, of the legal adjudication of the incapacity or incompetence of the principal; 3. The duration of time specified in the POA has not expired; and 4. If the attorney-in-fact is a successor, he/she has acknowledged by affidavit that the conditions have occurred which authorize a successor to act. 14 DOES THE ATTORNEY-IN-FACT NEED TO SIGN THE MEMBERSHIP OR ACCOUNT DOCUMENTATION? The attorney-in-fact does not need to sign any membership or account documentation. However, with respect to any transaction the attorney-in-fact wishes to undertake on behalf of the principal, the credit union should require that the attorney-in-fact sign in his/her representative capacity as attorney-in-fact, not in his/her individual capacity. Therefore, when signing any documents, the attorney-in-fact should sign as (Name of the attorney-in-fact), attorney-in-fact for (name of the principal) or (Name of the principal) by (name of the attorneyin-fact) or any similar written disclosure of the principal/attorney-in-fact relationship. 15 Such a signature constitutes an affirmation by the attorney-in-fact that the attorney-in-fact did not have, at the time of signing, actual knowledge of the termination or revocation of the POA. The credit union may rely upon such signature as conclusive proof that the POA has not been terminated or revoked, unless the credit union has actual knowledge that the POA has been terminated or revoked. 16 HOW SHOULD THE CREDIT UNION SETUP AN ACCOUNT WITH TWO ATTORNEYS-IN-FACT? If a POA authorizes two or more attorneys-in-fact to act on behalf of the principal, the credit union must look at the POA to determine if the signatures of all of the attorneys-in-fact are required on any documentation necessary to effect the transaction. effective. If the credit union is presented with a POA that was executed prior to August 1984, it may wish to consult with legal counsel to determine the POA s validity. 13 Minn. Stat (2011); If the credit union is presented with a POA created pursuant to another state s statutes, the credit union should review the other state s POA statute to determine the validity of the non-minnesota POA and may wish to consult with legal counsel to assist in the process. 14 Minn. Stat (2011). 15 Minn. Stat (2011). 16 Id. 13

15 POA does not require the attorneys-in-fact to act jointly Unless it is provided to the contrary in the POA, one attorney-in-fact may sign documentation on behalf of the principal, whether the other attorneys-in-fact consent or object. 17 POA requires attorneys-in-fact to act jointly If the POA requires that the attorneys-in-fact act jointly, all attorneys-in-fact must sign the necessary documentation on behalf of the principal. 18 If attorneys-in-fact at any time are required to act jointly, and there is only one remaining attorney-in-fact because of the death, resignation or inability to serve of all other original and successor attorneys-in-fact, the remaining attorney-in-fact alone may sign any necessary documentation on behalf of the principal. 19 WHAT SHOULD THE CREDIT UNION USE FOR THE TAXPAYER IDENTIFICATION NUMBER? The credit union uses the principal s taxpayer identification number (TIN) for all reporting purposes. DOES THE CREDIT UNION HAVE TO FOLLOW CIP PROCEDURES TO VERIFY THE ATTORNEY-IN- FACT S IDENTITY? Credit unions generally are not required to verify the identity of the attorney-in-fact who is transacting business on behalf of a member in accordance with the USA Patriot Act s Customer Identification Program (CIP) requirements. 20 However, a credit union s CIP procedures should address situations when the credit union will take additional steps to verify the identity of the attorney-in-fact if the attorney-in-fact is not an individual. 21 Regardless of the credit union s CIP procedures, the credit union always should require enough documentation to verify that the individual purporting to be an attorney-in-fact pursuant to a POA is in fact the true attorney-in-fact. 17 Minn. Stat (2011). 18 Minn. Stat (2011). 19 Id. 20 See 31 CFR Id. 14

16 MINNESOTA STATUTORY SHORT FORM POWER OF ATTORNEY WHAT IS THE MINNESOTA STATUTORY SHORT FORM? Minnesota Statutes Chapter 523 includes a Statutory Short Form Power of Attorney. 22 The short form is designed to provide Minnesotans, both the principal and persons/businesses receiving a POA, with a sample POA that is acceptable under Minnesota law. A sample Statutory Short Form POA is found in Exhibit A at the end of this guide. HOW SHOULD A CREDIT UNION HANDLE THE MINNESOTA STATUTORY SHORT FORM? Generally speaking, unless certain circumstances are met, a credit union must accept the authority of an attorney-in-fact that complies with the statutory requirements of this Statutory Short Form. 23 If the credit union unlawfully refuses to accept the Statutory Short Form POA, the credit union will be liable to the principal to the same extent as if it had refused to act on the principal s own authority. 24 WHEN CAN A CREDIT UNION REFUSE TO ACCEPT THE MINNESOTA STATUTORY SHORT FORM? There are limited circumstances in which the credit union may refuse the Statutory Short Form. Those circumstances are as follows: 1. The credit union has actual notice that the POA has been revoked; 2. The time period specified in the POA has expired; or 3. The credit union has actual knowledge that the principal is deceased, or if the POA is not durable, has actual knowledge of a judicial determination that the principal is legally incompetent. 25 Furthermore, the credit union may require that the POA contain a specimen signature of the attorney-in-fact. WHAT POWERS DOES THE STATUTORY SHORT FORM POA GIVE THE ATTORNEY-IN-FACT? The Statutory Short Form POA contains a number of categories of authority that may be given to the attorney-in-fact. Each of these categories are defined under Minn. Stat (see Exhibit B at the end of this guide). A principal may check any or all of these categories on the POA. When the attorney-in-fact seeks to transact on the principal s accounts with the credit union, the credit union should verify the principal checked the category entitled banking transactions on the Statutory Short Form prior to allowing the attorney-in-fact access to the account Minn. Stat (2011). 23 Minn. Stat (2011). 24 Id. 25 Id. 26 Minn. Stat (4) (2011). 15

17 The Statutory Short Form POA also has spaces where the principal can indicate: 1. Whether the POA is durable or nondurable; 2. Whether the attorney-in-fact may transfer the principal s property to the attorney-in-fact; and 3. Whether the attorney-in-fact is required to make an accounting to the principal. 27 The credit union should closely review the POA to determine the attorney-in-fact s authority before allowing the attorney-in-fact to transact any business on the principal s behalf. WHAT HAPPENS IF THE POWER OF ATTORNEY PREDATES THE MINNESOTA STATUTORY SHORT FORM? The Statutory Short Form POA became effective Aug. 1, A credit union may, but is not required to, rely on a pre-aug. 1, 1992, form executed after Aug. 1, The better practice would be for the credit union to require the post-aug. 1, 1992, form. CHECKLIST WHEN PRESENTED WITH POA Any time the credit union receives a POA, it should remember the following: A quick decision is not needed A credit union has the right to insist that the POA be scrutinized by the credit union s attorney. Take precautions to verify that the principal validly executed the POA The credit union should compare the signature on the POA with the principal s signature card. If the circumstances or the POA appear suspicious, the credit union should attempt to contact the principal to confirm the POA is valid. If the POA itself appears valid, the credit union should verify the identity of the attorney-in-fact. Verify the attorney-in-fact has proper authority Although the POA is validly executed, the attorney-in-fact may not be authorized to do what the attorney-in-fact is seeking to do. The credit union must always review the language of the POA to ensure it grants the authority the attorney-in-fact is seeking to exercise. Is the POA a springing POA? The credit union should check for a springing POA and make sure that the POA is in effect by requiring any documentation necessary to ensure that the conditions of the springing POA have been met. Is the principal deceased? If the credit union is aware that the principal is deceased, the credit union should no longer honor the POA. 27 Minn. Stat (1) (2011). 16

18 Has the POA been revoked? The credit union should check to ensure it has no actual knowledge that the POA has been revoked. Has the POA been terminated? The credit union should check to ensure that the POA does not contain automatic termination language, or if it does, that the termination date has not arrived. 17

19 DEPOSITS & WITHDRAWALS If an attorney-in-fact has been authorized by the POA to make deposits and withdrawals on the principal s account, any deposit or withdrawal by the attorney-in-fact is binding on the principal, the principal s heirs, and the representative of the principal s estate as though the principal had made the deposit or withdrawal. 28 The credit union should always check the POA to determine if the attorney-in-fact has such authority. HOW SHOULD THE ATTORNEY-IN-FACT SIGN ON THE ACCOUNT? An attorney-in-fact should sign in his/representative capacity as attorney-in-fact and not in an individual capacity. Therefore, when signing documents, the attorney-in-fact should sign as (Name of the attorney-in-fact), attorney-in-fact for (name of the principal) or (Name of the principal) by (name of the attorney-in-fact) or any similar written disclosure of the principal/attorney-in-fact relationship. 29 Such a signature constitutes an affirmation by the attorney-in-fact that the attorney-in-fact did not have, at the time of signing, actual knowledge of the termination or revocation of the POA. The credit union may rely upon such signature as conclusive proof that the POA has not been terminated or revoked, unless the credit union has actual knowledge that the POA has been terminated or revoked. 30 WHAT SHOULD THE CREDIT UNION DO IF THERE ARE MULTIPLE ATTORNEYS-IN-FACT? If a POA authorizes two or more attorneys-in-fact to act on behalf of the principal, the credit union must look at the POA to determine if the signatures of all of the attorneys-in-fact are required on a deposit or withdrawal. POA does not require the attorneys-in-fact to act jointly Unless it is provided to the contrary in the POA, one attorney-in-fact may make a deposit or withdrawal on behalf of the principal, whether the other attorneys-in-fact consent or object. 31 POA requires attorneys-in-fact to act jointly If the POA requires that the attorneys-in-fact act jointly, all attorneys-in-fact must consent, and sign the necessary documentation, to make a deposit or withdrawal. 32 If attorneys-in-fact at any time are required to act jointly, and there is only one remaining attorney-in-fact because of the death, resignation, or inability to serve of all other original and successor attorneys-in-fact, the remaining attorney-in-fact may alone make a deposit or withdrawal on behalf of the principal Minn. Stat (2011). 29 Minn. Stat (2011). 30 Minn. Stat (2011). 31 Minn. Stat (2011). 32 Minn. Stat (2011). 33 Id. 18

20 HANDLING SHARE DRAFTS (CHECKS) The credit union should review the POA to determine if the attorney-in-fact has the authority to write share drafts on the principal s account. HOW SHOULD SHARE DRAFTS BE ISSUED ON THE ACCOUNT? Share drafts should be issued in the same manner in which the account is titled. HOW SHOULD THE ATTORNEY-IN-FACT SIGN THE SHARE DRAFT? The attorney-in-fact should sign each draft in his/her capacity as attorney-in-fact, not in his/her individual capacity. For example, the attorney-in-fact should sign as (Name of the attorney-infact), attorney-in-fact for (name of the principal) or (Name of the principal) by (name of the attorney-in-fact) or any similar written disclosure of the principal/attorney-in-fact relationship. 34 Such a signature constitutes an affirmation by the attorney-in-fact that the attorney-in-fact did not have, at the time of signing, actual knowledge of the termination or revocation of the POA. The credit union may rely upon such signature as conclusive proof that the POA has not been terminated or revoked, unless the credit union has actual knowledge that the POA has been terminated or revoked. 35 WHAT SHOULD THE CREDIT UNION DO IF THERE ARE MULTIPLE ATTORNEYS-IN-FACT? If a POA authorizes two or more attorneys-in-fact to act on behalf of the principal, the credit union must look at the POA to determine if the signatures of all of the attorneys-in-fact are required on a share draft. POA does not require the attorneys-in-fact to act jointly Unless it is provided to the contrary in the POA, one attorney-in-fact may sign a share draft on behalf of the principal, whether the other attorneys-in-fact consent or object. 36 POA requires attorneys-in-fact to act jointly If the POA requires that the attorneys-in-fact act jointly, all attorneys-in-fact must sign a share draft for the share draft to be properly payable Minn. Stat (2011). 35 Id. 36 Minn. Stat (2011). 37 Minn. Stat (2011). 19

21 If attorneys-in-fact at any time are required to act jointly, and there is only one remaining attorney-in-fact because of the death, resignation, or inability to serve of all other original and successor attorneys-in-fact, the remaining attorney-in-fact alone may sign a share draft on behalf of the principal Id. 20

22 MISCELLANEOUS POWER OF ATTORNEY ISSUES TO CONSIDER WHAT HAPPENS IF AN ATTORNEY-IN-FACT ABUSES HIS/HER POWER? The Uniform Commercial Code (UCC) governs a credit union s liability when a fiduciary, such as an attorney-in-fact, cashes a check intended to benefit the principal (referred to as represented person under the UCC) and misappropriates the funds. A credit union will not be held liable if it cashes a check for a fiduciary (i.e. attorney-in-fact) that misappropriates the check funds and, thus, breaches his/her fiduciary duty, unless the credit union has actual knowledge that the fiduciary (i.e. attorney-in-fact) has breached his/her fiduciary duty. 39 If a draft is either payable to the represented person (e.g. the principal) or the fiduciary as such (e.g. check issued to John Doe, Attorney-in-Fact for Mary Doe), the credit union will be deemed to have notice of the attorney-in-fact s breach of fiduciary duty if the draft is: 1. Taken in payment of or as security for a debt known by the credit union to be a personal debt of the attorney-in-fact; 2. Taken in a transaction known by the credit union to be for the personal benefit of the attorney-in-fact; or 3. Deposited to an account other than an account of the POA, as such, or an account of the represented person. 40 A credit union with notice of a breach of fiduciary duty will be unable to qualify as a holder in due course on the check and will therefore be unable to charge back against the account if the check is returned NSF. 41 The credit union may also be held liable in a negligence action brought by a represented person (i.e. the principal). Case law and UCC provisions that prohibit financial institutions from disclaiming liability for good faith, diligence, reasonableness and due care as those duties are imposed by statute, make it doubtful that a credit union could successfully eliminate this liability by including disclaimers in their account agreements BARKLEY CLARK & BARBARA BREWER CLARK, THE LAW OF BANK DEPOSITS, COLLECTIONS AND CREDIT CARDS 5.07[1] (rev. ed. 2003). 40 Minn. Stat (4) (2011). 41 Minn. Stat (2011). 42 Minn. Stat (3), (1); O Mara Enterprises, Inc. v. People s Bank of Weirton, 420 S.E.2d 727 (W. Va. 1992) (language included in corporate resolution which authorized bank to pay all instruments without inquiry as to the circumstances of their issue or the disposition of the proceeds, could not exonerate the bank from its duty of inquiry when corporate checks were made payable to the depository bank but were allowed to be deposited into the account of a corporate employee); Master Chem. Corp. v. Inkrott, 563 N.E.2d (1990) (bank could not contract away its responsibility to find out form the depositor what the bank was to do with the checks in light of the fact that the bank was also the payee and the depositor did not owe the bank any money). 21

23 ACCESS TO ACCOUNT INFORMATION The principal always retains access to his/her account information, regardless of the authority given to an attorney-in-fact. The credit union should review the POA to determine the authority given to the attorney-in-fact before releasing any account information to the attorney-in-fact. VOTING RIGHTS Minnesota law and the Federal Credit Union Act prohibit a member from voting through proxy at the annual meeting. 43 The term proxy is undefined under the law, and it is unclear as to whether the attorney-in-fact would be considered a proxy if he/she were to vote in the principal s place at the annual meeting. In the event a credit union encounters a situation where an attorney-in-fact seeks to vote on behalf of the principal, it should first consult with its attorney. TERMINATION OF POA/REVOCATION OF POA/SUCCESSOR ATTORNEY-IN-FACT How does a durable POA terminate? A durable POA terminates upon the earliest to occur of: 1. The death of the principal 44 ; 2. The expiration of the period of time specified in the POA 45 ; or 3. For a POA to the principal s spouse, upon the commencement of proceedings for dissolution, separation or annulment of the principal s marriage. 46 How does a nondurable POA terminate? A nondurable POA terminates upon: 1. The death of the principal 47 ; 2. The court determined incapacity or incompetence of the principal 48 ; 3. The expiration of a date of termination specified in the POA 49 ; or 4. For a POA to the principal s spouse, upon the commencement of proceedings for dissolution, separation or annulment of the principal s marriage. 50 (Note: unlike a durable POA, a nondurable POA terminates upon the incapacity or incompetence of the principal.) 43 Minn. Stat (2011); Federal Credit Union Act Minn. Stat (2011); See also Minn. Stat (2011) (A missing person is presumed to be living until actual proof of death or legal adjudication of death occurs). 45 Minn. Stat (2011); See also Minn. Stat (2011) (An expiration date in a POA, if any, must be stated in terms of a specific month, day, and year. An expiration date stated in any other way has no effect). 46 Minn. Stat (2011). 47 Minn. Stat (2011); See also Minn. Stat (2011) (A missing person is presumed to be living until actual proof of death or legal adjudication of death occurs). 48 Minn. Stat (2011). 49 Minn. Stat (2011); See also Minn. Stat (2011) (An expiration date in a POA, if any, must be stated in terms of a specific month, day, and year. An expiration date stated in any other way has no effect). 50 Minn. Stat (2011). 22

24 WHAT HAPPENS WHEN THE PRINCIPAL DIES? All POAs, whether durable, nondurable or springing, terminate upon the death of the principal and the attorney-in-fact has no further authority. 51 CAN THE PRINCIPAL REVOKE A POA? The principal may revoke a POA at any time in a written instrument of revocation signed by the principal and, in the case of a signature on behalf of the principal by another or a signature by a mark, acknowledged before a notary public. 52 If the principal has a conservator or guardian, the conservator or guardian of a principal has the power the principal would have if the principal were not incapacitated or incompetent to revoke, suspend, or terminate all or any part of the POA. 53 Revocation of a POA is not effective until the credit union has received actual notice of the revocation (i.e. a written Revocation of Power), and the credit union may presume that a POA is still in effect until it receives a written Revocation of Power 54 or has other actual notice of the revocation. The credit union may presume a written Revocation of Power is effective if it purports to be signed by the principal named in the POA. In such a case, the credit union is not liable for later refusing to accept the authority of the attorney-in-fact. 55 DEATH OR RESIGNATION OF ATTORNEY-IN-FACT If an attorney-in-fact dies or resigns, the POA terminates, unless there is a successor attorneyin-fact. If the original attorneys-in-fact were required to act jointly, and there is only one remaining attorney-in-fact because of the death, resignation, or inability to serve of all other original and successor attorneys-in-fact, the remaining attorney-in-fact may act alone on behalf of the principal. 56 SUCCESSOR ATTORNEY-IN-FACT If two or more attorneys-in-fact are originally appointed and one dies, resigns, or is unable to serve, a successor attorney-in-fact named in a POA, executed in conformity with the Statutory Short Form requirements, replaces the attorney-in-fact who died, resigned, or is unable to serve Minn. Stat (2011). 52 Minn. Stat (1) (2011). 53 Id. 54 Minn. Stat (2) (2011). 55 Minn. Stat (3) (2011). 56 Minn. Stat (2011). 57 Id. 23

25 How should the credit union add a successor attorney-in-fact to the POA account? The credit union should have a successor attorney-in-fact sign an affidavit setting forth the conditions that grant the successor attorney-in-fact authority to act under the POA (such as the death, incompetence or resignation of another attorney-in-fact) and stating that those conditions have occurred. The credit union may rely upon such an affidavit, and the affidavit is conclusive proof that the conditions have occurred. 58 LENDING ISSUES Does the attorney-in-fact have authority to borrow on behalf of the principal? The POA may provide that the attorney-in-fact has authority to borrow money on behalf of the principal. For example, the Minnesota Statutory Short Form POA grants such authority under the broad Banking Transactions category. 59 The credit union should carefully review the POA to determine what authority the attorney-in-fact has been given. Real Estate Transactions When engaging in a real property transaction with a purported attorney-in-fact, the credit union may require that the attorney-in-fact execute an Affidavit of Attorney-in-Fact for real property transactions as conclusive proof that the POA has not been terminated or revoked. 60 REVOCATION OF POWER IN REAL PROPERTY TRANSACTIONS With respect to real property transactions only, actual notice of revocation means that the credit union has received a written instrument of revocation, or that a written instrument of revocation containing the legal description of the real property has been recorded in the office of the county recorder or filed in the office of the registrar of titles. A recorded or filed revocation is actual notice of revocation of a POA only as to any interest in real property described in the revocation and located in the county where it is recorded. 61 COLLECTION REMEDIES INVOLVING POA ACCOUNTS Can a credit union offset a POA account? All credit unions have a statutory right to set off against the shares and deposits of a member for any sum due to the credit union. 62 The credit union can set off against a member s account only for debts of the member, not the debts of an attorney-in-fact. Is a POA account subject to garnishment, execution or levy? A member s account is subject to garnishment, execution or levy issued against the owner(s). 58 Minn. Stat (1) (2011). 59 Minn. Stat (4)(7) (2011). 60 Minn. Stat (2011). 61 Minn. Stat (2) (2011). 62 Minn. Stat (2011); 12 U.S.C. 1757(11). 24

26 Can a POA account be subject to garnishment, execution or levy if it is issued against the attorney-in-fact? A POA account is not subject to garnishment, execution or levy issued against an attorney-infact. TRUSTEES Can a trustee delegate his/her trust powers through a POA? Under Minnesota law, unless prohibited or otherwise restricted by the terms of the trust instrument, a trustee generally may delegate to any person any trust function that a prudent person of comparable skills could properly delegate under the circumstances. 63 Thus, unless the trust instrument prohibits or restricts delegation, a trustee can delegate his or her trust responsibilities to an attorney-in-fact through the use of a validly executed POA. The trustee is required to exercise reasonable care, skill and caution in: 1. Selecting an agent; 2. Establishing the scope and terms of the delegation, consistent with the purposes and terms of the trust; and 3. Periodically reviewing the agent s actions in order to monitor the agent s performance and compliance with the terms of the delegation. 64 What steps should a credit union take if an attorney-in-fact wants to serve as trustee on a trust account? If an individual seeks to act as an attorney-in-fact for a trustee and transact business on an account for a trust at the credit union, the credit union should: 1. Review the Certificate of Trust to ensure that the trust permits such delegation; 2. Review the POA to determine that such authority has been granted; and 3. Review the POA to ensure it has been signed by the principal in his or her capacity as trustee (e.g. Jane Doe, trustee for Doe Revocable Living Trust). If a Minnesota Statutory Short Form POA is presented to the credit union, either category I (i.e. fiduciary transactions) or N (i.e. all of the powers listed in (A) through (M) above and all other matters) should be checked. MILITARY POAS Military personnel are allowed by law to execute military POAs to authorize an individual to transact business on their behalf. 65 A military POA is exempt from any requirement of form, substance, formality or recording that is otherwise required under Minnesota law. A credit union must give the military POA the same legal effect as a POA prepared and executed under Minnesota, or any other state s, law. 66 To be effective, the military POA must be notarized Minn. Stat. 501B.152(a) (2011). 64 Minn. Stat. 501B.152(a) (2011) U.S.C. 1044b U.S.C. 1044b(a) U.S.C 1044b(b). 25

27 26

28 27

29 28

30 1 MINNESOTA STATUTES CONSTRUCTION. Subdivision 1. Real property transactions. In a statutory short form power of attorney, the language conferring general authority with respect to real estate transactions, means that the principal authorizes the attorney-in-fact: (1) to accept as a gift, or as security for a loan, to reject, to demand, to buy, to lease, to receive, or otherwise to acquire either ownership or possession of any estate or interest in real property; (2) to sell, exchange, convey either with or without covenants, quitclaim, release, surrender, mortgage, encumber, partition or consent the partitioning, plat or consent platting, grant options concerning, lease or sublet, or otherwise to dispose of, any estate or interest in real property; (3) to release in whole or in part, assign the whole or a part of, satisfy in whole or in part, and enforce by action, proceeding or otherwise, any mortgage, encumbrance, lien, or other claim to real property which exists, or is claimed to exist, in favor of the principal; (4) to do any act of management or of conservation with respect to any estate or interest in real property owned, or claimed to be owned, by the principal, including by way of illustration, but not of restriction, power to insure against any casualty, liability, or loss, to obtain or regain possession or protect such estate or interest by action, proceeding or otherwise, to pay, compromise or contest taxes or assessments, to apply for and receive refunds in connection therewith, to purchase supplies, hire assistance or labor, and make repairs or alterations in the structures or lands; (5) to use in any way, develop, modify, alter, replace, remove, erect, or install structures or other improvements upon any real property in which the principal has, or claims to have, any estate or interest; (6) to demand, receive, obtain by action, proceeding, or otherwise, any money, or other thing of value to which the principal is, or may become, or may claim to be entitled as the proceeds of an interest in real property or of one or more of the transactions enumerated in this subdivision, to conserve, invest, disburse, or utilize anything so received for purposes enumerated in this subdivision, and to reimburse the attorney-in-fact for any expenditures properly made by the attorney-in-fact in the execution of the powers conferred on the attorney-in-fact by the statutory short form power of attorney; (7) to participate in any reorganization with respect to real property and receive and hold any shares of stock or instrument of similar character received in accordance with a plan of reorganization, and to act with respect to the shares, including, by way of illustration but not of restriction, power to sell or otherwise to dispose of the shares, or any of them, to exercise or sell any option, conversion or similar right with respect to the shares, and to vote on the shares in person or by the granting of a proxy; (8) to agree and contract, in any manner, and with any person and on any terms, which the attorney-in-fact may select, for the accomplishment of any of the purposes enumerated in this subdivision, and to perform, rescind, reform, release, or modify such an agreement or contract or any other similar agreement or contract made by or on behalf of the principal; (9) to execute, acknowledge, seal, and deliver any deed, revocation, mortgage, lease, notice, check, or other instrument which the attorney-in-fact deems useful for the accomplishment of any of the purposes enumerated in this subdivision; Copyright 2012 by the Office of the Revisor of Statutes, State of Minnesota. All Rights Reserved. 29