How to invoke a durable power of attorney

Big problem.

A durable power of attorney is a basic estate planning tool that everybody needs. It lets a trusted friend or relative conduct business on financial accounts in the event you become incapacitated.

Yet, one of us, trying to invoke a durable power of attorney for a relative, was unable to get financial institutions to accept it. Financial institutions cite widespread fraud for their tough requirements.

At least one stock transfer agent demanded either a new document, a lawyer's letter or a "Medallion guarantee." Of course, a new document or lawyer's letter could prove costly.

What's a "Medallion Guarantee?"

This signature guarantee can come from a commercial bank, savings bank, credit union or broker dealer-that participates in one of three Medallion signature guarantee programs, according to the Securities and Exchange Commission.

The programs include:

• Securities Transfer Agents Medallion Program (STAMP).

• Stock Exchanges Medallion Program (SEMP).

• New York Stock Exchange Medallion Signature Program (MSP).

To get this guarantee, the SEC says, you likely must be a customer of a participating financial institution.

"Transfer agents can refuse to accept a signature guarantee from from an institution that does not participate in the Medallion program or that is not recognized by the transfer agent," the SEC says.

"While the guarantor can charge a fee for their services, they often don't and offer them as part of their customer services." The SEC directs you to Kemark Financial Services Inc., program administrator for STAMP and SEMP, at contactkfs@kemark.com, for more information.

At least two major national banks we contacted said they participate in Medallion Guarantee program. However, bank policy prohibits them from issuing this guarantee on a power of attorney document. Reason: Fear of liability.

So what can you do if you gracefully accepted the role of a power of attorney for a close friend or relative?

Act before your appointer becomes incapacitated.

• Make sure the person drawing up a power or attorney document obtains a written commitment that the law firm will represent you — the power-holder — at no extra cost if the document is declined.

• Have the power-giver check with his or her bank, brokerage firm or investment company on its specific policy concerning powers of attorney. Have it arranged in advance for you to be listed as power of attorney on all accounts-before the person is incapacitated.

• Have securities held in street name, meaning they're held in the name of a brokerage firm.

• Consider having the power-giver close out the account while he or she can.

The National Conference of Commissioners on Uniform State Laws, Chicago, is attempting to address these power of attorney problems through its "Uniform Power of Attorney Act." Last we checked, however, the act only was believed to have been enacted in three states.

Spouses Gail Liberman and Alan Lavine are syndicated columnists. Their latest book is "Quick Steps to Financial Stability" (Que/Penguin). You can contact them at www.moneycouple.com.