A number of our private money loan investors (lenders) hold their beneficial loan interests in their family trusts. We frequently need to sign servicing related documents on their behalf and as a result created a recordable “Limited Power of Attorney” to be executed with our Loan Servicing Agreement.
Recently, title companies began refusing to accept our “Limited Power of Attorneys” because they say that the power to execute a power of attorney on behalf of the trust is not being granted to the Trustee in the trust. Is such a power now generally incorporated in the newer trusts? If not, could we use a Durable Power of Attorney for our purposes or do the powers granted in a Trust Durable Power of Attorney only become applicable if the trustee is incapable of performing his or her functions? Any thoughts of what we can do if we can’t use a Durable Power of Attorney for our purposes
I see no reason why you cannot use a Power of Attorney form, if the trust permits it. The problem that I think you are running into is that the trust instrument provides for successor trustees in the event of incapacity. The companies you are dealing with are concerned about their liability. They do not want to allow person "A" to sign documents under a Power of Attorney and then have person "B" (or all of the beneficiaries of the trust) come back and say that, "A" was not authorized under the trust agreement.
To get around your problem you need to make sure that the trust agreements in question authorize the trustee to delegate authority. If this is included in the trust agreement, (perhaps, along with a statement that the trust indemnifies and holds harmless anyone accepting the authority so delegated), then you may have better success. I would imagine you may need to fight this battle on a case by case basis, however. You will want to work with those title companies that are more amenable to your documents and your process.
In any event, a durable power of attorney is probably not the way to go. A limited power is likely to meet with less resistance. The idea is not that the trustee is incapacitated (thereby requiring the successor to take over), but simply is not present to sign the necessary documents.
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The problem you’re going to continue to run into is that banks and title companies all have different rules for relying on powers of attorney—even though California law is clear that third parties are allowed (and even protected) to rely on a properly executed power of attorney.
As a general rule, there are NO requirement that the Trust instrument itself contains terms stating that an agent under a limited, general or durable power of attorney has the right to act in place of the Trustee/Settlor. The only requirement from a Trust standpoint is to make certain there are terms in the Trust allowing the Trustee/Settlor to amend, modify, manage, administrate, or revoke the Trust instrument. If the Trustee/Settlor has that power, then an agent under a valid power of attorney has the same authority as the Trustee/Settlor. Of course the power of attorney needs to state the powers of the agent, including the power to make decisions for the Trustee’s/Settlor’s Trust.
The previous answer makes sense. It may be feasible to contact each title company and figure out the requirements they need to honor the power of attorney. If there are only a few title companies, this is a workable situation. Good luck.