Can a Power of Attorney Close a Bank Account?

A power of attorney (POA) gives a person chosen by the principal legal authority to handle specified matters for them. The person receiving that authority is generally known as the agent or attorney-in-fact. A financial POA may cover banking transactions, investments, real estate and other financial matters. The scope depends on the authority granted in the document. This authority can include closing a bank account. State law, the terms of the POA, and the bank’s requirements can determine what an agent can and cannot do.

A financial advisor can explain the benefits of power of attorney as well as other estate planning options.

Creating a Valid Power of Attorney Document to Close a Bank Account

For a POA to be effective, it must meet the legal requirements that apply in its jurisdiction. Those rules vary by state and can include requirements involving the principal’s signature, notarization or witnesses.

The document should also provide enough financial authority for the agent to complete the intended transaction. There are several types of POA. A general financial POA may cover a broad range of money matters. Meanwhile, a limited POA can authorize only designated actions. A durable POA generally remains effective if the principal later becomes incapacitated. A springing POA, where permitted, takes effect only after a specific condition identified in the document occurs.

Creating a financial POA can involve the following steps:

Decide which financial matters the agent will have permission to handle.
Select someone you trust to serve as the agent.
Prepare a power of attorney form that meets state requirements and describes the powers being granted.
Determine when those powers begin and whether they should continue if you become incapacitated.
Complete the document using the signing, witnessing or notarization procedures required under state law.
Give the bank a copy before the agent needs to act so they can address any questions in advance.

An agent does not become the owner of the principal’s property simply by receiving financial authority. The agent has legal duties when acting for the principal. They must use the granted powers for the principal’s benefit and within the limits of the POA. Maintaining records of transactions can also help document how the agent used this authority.

Using Power of Attorney to Close a Bank Account

An agent can close a checking account, savings account, or other bank account when the POA grants adequate authority to do so. The document does not necessarily have to contain the exact phrase “close bank accounts.” Whether broader banking language is sufficient depends on the document and applicable law.

The agent can contact the financial institution before closing the account to find out what it requires. The process may include:

Submitting the POA or another version of the document requested by the bank.
Showing identification and completing any identity verification required by the institution.
Filling out the appropriate account closure paperwork.
Checking for pending transactions, outstanding checks, automatic withdrawals, and recurring deposits.
Moving the remaining balance as authorized by the POA and consistent with the principal’s interests.
Keeping documentation that shows where the money went and when the account closed.

Authority to conduct a banking transaction is different from ownership of the money. If an agent closes an account, the remaining balance continues to belong to the principal. The agent should not move those funds into their personal account unless they have separate legal authority for the transaction.

Closing an ordinary bank account also does not, by itself, generally make the account balance taxable. Tax consequences can depend on the type of assets involved and whether another transaction, such as selling an investment, occurs as part of the process.

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When a Bank Can Question or Reject a Power of Attorney

Presenting a POA does not mean that a bank must process every requested transaction immediately. Financial institutions may review the document to determine whether it is valid, currently effective and broad enough to authorize the proposed action. State law can establish both the circumstances in which a bank must accept a POA and the legitimate reasons for refusing it.

Questions may arise if the bank has evidence that the principal revoked the POA, the document is invalid, or it suspects fraud or financial exploitation. Depending on state law, the institution may have the right to request additional documentation or assurances before allowing the agent to act.

A bank’s preference for its own POA form does not necessarily invalidate a properly executed document created elsewhere. If an institution declines to recognize a POA, the agent can ask for the specific reason and request further review within the bank. An attorney can help determine whether the state’s POA law permits the refusal.

When Power of Attorney Authority Ends

A POA does not give an agent permanent authority. The principal may be able to revoke it while legally capable of doing so, and the document itself can specify an expiration date or another event that terminates the agent’s powers. Other circumstances under state law can also end the authority.

Typically, an agent’s authority under a principal’s POA ends after their death. This means an agent permitted to manage or close an account during the principal’s lifetime cannot continue relying on that document after the principal dies.

After death, authority over property belonging to the estate generally shifts to an executor, administrator or other legally authorized representative. How a particular bank account is handled can also depend on its ownership and beneficiary designation. For example, a jointly owned or payable-on-death account may receive a different treatment than an individually owned account that becomes part of the estate.

Other Ways to Give Someone Access to a Bank Account

A woman drafting documents giving her daughter power of attorney to close a bank account.

Giving someone financial authority through a POA is one approach, but other arrangements may provide access to an account. The legal consequences depend on whether the other person is being given transaction authority, an ownership interest, or responsibility for assets held in a separate arrangement.

A joint bank account gives another owner rights to the account rather than simply authority to act for the original owner. That distinction can affect access to the money during both owners’ lifetimes and what happens to the account after one dies. For that reason, adding a joint owner can have consequences beyond making everyday banking more convenient.

Some banks may offer accounts or arrangements that permit another person to assist with transactions without making that person a joint owner. The availability, terminology and rules for these arrangements can differ by institution and state.

Another possibility is a trust. When assets are held in a trust, the trustee manages them under the terms of the trust rather than through authority granted by a POA. This structure can be useful when the owner wants to establish longer-term instructions for managing and distributing property.

Frequently Asked Questions About Power of Attorney

Can a Bank Refuse to Accept a Power of Attorney for Closing an Account?

In some cases, a bank may refuse to accept a power of attorney if they have concerns about its validity, if it does not meet their internal requirements, or if they suspect fraud or abuse. If a bank refuses to accept a power of attorney, it may be necessary to seek legal advice to understand your rights under the Uniform Power of Attorney Act (UPOAA).

What Happens to Any Remaining Funds in an Account Closed By a Power of Attorney?

When a power of attorney closes a bank account, any remaining funds in the account will typically pay out to the account holder in the form of a check or transfer from one bank account to another, as directed by the agent.

Bottom Line

A husband and wife drafting power of attorney documents to close a bank account.

An agent may be able to shut down a principal’s bank account when the POA provides sufficient financial authority. Before completing the request, the financial institution can verify the document and the agent’s authority under applicable law. The account balance remains the principal’s property, and the agent must handle it accordingly. A POA also stops operating at the principal’s death, at which point control of the account depends on its ownership structure, beneficiary arrangements and estate administration rules.

Tips for Using Power of Attorney

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If you’re considering whether to set up a power of attorney versus a trust, it can be helpful not only to understand the different types of trusts, but also simple vs. complex trusts.