Aging is hard. And aging in our legal and financial world can be confusing, even for those without cognitive impairment.

More than half of adults in the U.S. have a financial power of attorney. Which is good, but will those legal documents be honored when they are needed?

For the 40% of Americans who have done their estate planning, there is no guarantee. The answer is: It depends.

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Without a national standard of legal practice, complications and a tangle of paperwork are greater than necessary.

Well-meaning financial planners and legal professionals insist on clients’ valid state legal documents, including financial power of attorney (POA). But those legal documents — signed, witnessed and paid for — are being rejected by financial-services companies, whose compliance departments want their own version of a POA to protect their interests. This is true despite the fact that the Uniform Power of Attorney Act was adopted in 2016 in the Uniform Probate Code (UPC) of the U.S.

The best legal minds in the country serve on the Uniform Law Commission and created this POA act. Yet, as a financial professional, I have seen this fail numerous times.

Such as for my client Maria (whose last name I will withhold), who was caregiving for her husband, Jack, who had early-stage Alzheimer’s. Despite having arranged their estate plan less than five years ago, Maria was struggling and needed help with her power of attorney.

The investment companies that held her husband’s IRAs and a credit card company did not accept the legal document their lawyer drew up. She thought she had done everything right but was no longer sure of what to sign or whom to trust, as she was overwhelmed.

A state problem

What is the issue? The act has to be adopted by each state to be valid and the designated agent has to know if it is in their state. As of this writing, 29 states have adopted the act. However, the states where the four of five largest financial institutions are chartered have not done so.

The aging public are already faced with financial risks from Ponzi schemes to elder abuse, to financial fraud, which causes $3 billion of losses annually. Now, it’s challenged by an industry that’s simply trying to protect itself.

This issue calls for systemic change. What if every one of your doctors or practitioners had a different health-care directive you needed to sign, date and keep on file with them? Not to mention a copy for yourself — crazy making, right? 

The largest companies in the U.S. — including Merrill Lynch, Schwab, TIAA-CREF and TD Ameritrade — require special power of attorney forms. Even Sam’s Club’s credit card company does not accept a valid power of attorney written by a legal professional.

Central registry

However, if the Uniform Power of Attorney Act were adopted nationally and files were kept on a central database, there would be no multiple POA forms needed. 

There are other options. As an example, there is a national registry for your health care power of attorney. Any health care provider or hospital in the country can access your health directive if you add it to the registry. This is a streamlined, legal and essential part of the planning process, thanks in part to the Terri Schiavo case over in the early 2000s. 

There are “trusted person forms” denoting an alternate contact for accounts requested by investment firms, per the SEC, since February 2018. Though the attempt is a step in the right direction, there are pitfalls. The requirement is to send them out, not to be sure they are returned. These do not authorize the person listed to act on behalf of the client as they are not powers of attorney.

What most people don’t know

Be realistic. Someone with cognitive decline, or someone who is traveling or even who is not detail-oriented may overlook or miss these forms even if they are sent out twice. Inconsistency is just one part of the issue. Some clients do not follow up because they know they already have a legal POA. 

The current system is opening a family to fraud, loss of income and elder abuse — when the wrong person self-appoints at an investment firm but was never named in the legal documents, as I have witnessed. A son who lived with his mom knew nothing about her estate plan except “my sister handles it.”

Yet, when her financial company sent paperwork, he filled it out with his name and had his mom sign it. The result is a financial planning mess, jeopardizing the client because they now have two powers of attorney who may not act in unison.

The great injustice is hidden to many because the average person does not know about this legal disparity. When the issue arises, the party is already under stress and just follows along. 

Yet, there is another way. There is a better way. Contact your state legislator to make a change. We have a national model for health care directives, and it needs to be implemented in the financial world.  If the industry does not act, governmental and legislative bodies need to make this happen. National action is needed. Until then, be prepared for a paperwork storm in a paperless world. 

CD Moriarty is a certified financial planner, a columnist for MarketWatch and a personal-finance speaker. She blogs at MoneyPeace.