Durable (Financial) Powers of Attorney, “General”

Background.  You will want to consider a durable (financial) power of attorney when you engage in estate and disability planning.  You will be giving your agent the ability to do much that you, if personally present, could do.  You may appoint your agent under a “general power of attorney” – with lots and lots of authority -- or a “limited” or “special” power of  attorney; for example, a special power of attorney may authorize your agent to sell a car or your home only.  Do not ever appoint as an agent someone you do not trust.  Some people do appoint a relative who is not really trustworthy as agent – this is probably magical thinking: “If I become incapacitated, surely Johnny Boy, my son, will see the light and behave properly.”  Really?  Would you tell your best friend to do this?

Texas has adopted the Uniform Power of Attorney Act (set forth in the Estates Code), including a form (suggested) and the “short form” powers.  For example, the short form power “real property transactions” which is on the actual power of attorney is defined in the Estates Code as granting to the agent a great deal of authority, including the power to: “sell, exchange, convey with or without covenants, quitclaim, release, surrender, mortgage, encumber, partition or consent to partitioning, subdivide, apply for zoning, rezoning, or other governmental permits, plat or consent to platting, develop, grant options concerning, lease or sublet, or otherwise dispose of an estate or interest in real property or a right incident to real property”.

If you choose all of the short forms, you will have granted so much authority to your agent that, colloquially, you will be said to have a “general power of attorney”.  (Starting January 1, 2013, you must initial before each power you want or initial at the end if you want your agent to have all of the listed powers.) 

Unless you choose, using the statutory form or a variation, to make your agent’s authority last beyond your incapacity (effective when you sign it and good even if you are incapacitated – “durable”) or become effective on your incapacity (“springing”), your agent’s authority ends if and when you become incapacitated.  Your Power of Attorney is not effective after your death.

Discussion.  Co-Agents?  Living Revocable Trust?  If you do not have someone who is trustworthy who you can appoint as an agent, consider a revocable trust (also called as a “management trust” and a “living trust.”)  With a revocable trust, you can appoint Co-Trustees and require them to act jointly or allow each to act separately.

If you have someone you trust, you also may appoint one agent or more a Co-Agents and require the Co-Agents to act jointly or allow each to act separately.

BUT,  please note that banks and other financial institutions may not want to be responsible for making sure that Co-Trustees or Co-Agents actually act together.  Recently, two children of a client of our firm were required under the power of attorney he had done years ago to act jointly.  The bank refused to honor the direction that they act jointly (apparently, due to concerns about liability).  Instead, before the bank would allow them to act at all (even jointly), the bank required that each sign an indemnification agreement confirming that the bank was not responsible for making sure that each signed checks or jointly gave transfer and other instructions and also required each to indemnify the bank against any complaints one might have against the other as a Co-Agent.

What do you do to plan for your Co-Agents and/or Co-Trustees refusing to act jointly, especially when the bank is likely not to require joint actions?  Consider asking your attorney to draft in your Power of Attorney or Revocable Trust a plan to be triggered if this happens, like granting to the Agent or Trustee who is following the rule the right to go to  court without notice to the Agent or Trustee who is taking unilateral actions and get a temporary restraining order (“TRO”); authorize the Agent or Trustee who is following the rules to invoke a mandatory mediation or arbitration to be paid for from funds of the principal (who signed the power of attorney) or Trust; include a provision that if a Co-Agent or Co-Trustee who is required to act jointly acts unilaterally, that the Agent or Trustee will be treated as having resigned and an alternate treated as succeeding as Co-Agent or Co-Trustee; and look into whether a bank will allow the Co-Agents or Co-Trustees to pen a so-called safekeeping account (by court order or otherwise) where nothing will be released to pay bills unless both have signed. 

– Cindy W. Veidt, Maura Phelan, and Kathleen Ford Bay

Changes to the Texas Statutory Durable Power of Attorney Form

Effective January 1, 2014, Texas has adopted a new pre-approved form for its Statutory Durable Power of Attorney, a/k/a the power of attorney for your financial affairs. All forms must substantially comply with the new statute in order to remain effective.

Substantial compliance is always a tricky task. In order to avoid challenges that may be determined in a judge’s discretion, Texas residents should consider preparing a new statutory durable power of attorney that closely follows the specific statutory form now contained in Section 752.051 of the Texas Estates Code. We also recommend updating your estate and health care planning documents – including powers of attorney forms – whenever you have experienced a significant “life event,” such as the birth or adoption of a child, marriage, divorce, or the death of a relative or significant other.

Be sure to initial one or more of the options (marked A though N) on the new form; otherwise, you have not granted your agent any powers to act on your behalf. 

Additionally, if you want to be sure that you have granted your agent a “general power of attorney” – the ability to perform any and every type of legally permissible action in your place, as if he or she were you – you should include specific language to the effect that “this document shall be construed and interpreted as a general power of attorney and my agent (attorney-in-fact) shall have the power and authority to perform or undertake any action that I could perform or undertake as  if I were personally present.”

The former statutory durable power of attorney form (Section 490(a) of the now-replaced Texas Probate Code) contained this language; the new provision does not.

Because this financial power of attorney is a very powerful tool - and is also ripe for abuse by your agent under the wrong circumstances - we highly recommend that you consult with an attorney prior to signing this legal document, so that you are fully aware of the rights, responsibilities, and potential liabilities that can occur.

By: Cynthia W. Veidt, cindy@lpvlaw.com

Changes to the Texas Medical Power of Attorney Form

Texas has adopted a new pre-approved form for its Medical Power of Attorney, a/k/a the power of attorney for your financial affairs. All forms signed after January 1, 2014, must substantially comply with the new statute in order to be effective.

Luckily, the new form – still located at Section 166.164 of the Texas Health and Safety Code – is substantially similar to the previous versions of this form. And any Medical Power of Attorney form executed before December 31, 2013, will not require a revision in order to remain effective, so long as it complied with the law in effect at the time it was signed.

The primary change in the new Texas Medical Power of Attorney Form relates to its execution. Now, you can sign the form in front of a notary without the need for any witnesses. Alternatively, you can sign the form in front of two witnesses if a notary is unavailable. Section 166.163 of the Texas Health and Safety Code describes the types of persons who may act as witness to a Medical Power of Attorney.

By: Cynthia W. Veidt, cindy@lpvlaw.com

The New Texas Estates Code is Here

Effective January 1, 2014, Texas has fully adopted the Texas Estates Code.  This “new” set of statutes is a recodification of the former Texas Probate Code, Texas Trust Act, and a number of related statutes contained in the Texas Health & Safety Code and other statutes.

Although most of the provisions remain unchanged – save for a new citation – you should make sure to check your estate planning forms to ensure that they remain effective and comply with any new requirements.  In particular, the new Estates Code has made some changes to the Statutory Durable Power of Attorney form (the power of attorney for financial affairs).

We also recommend updating your estate planning documents – including powers of attorney forms – whenever you have experienced a significant “life event,” such as the birth or adoption of a child, marriage, divorce, or the death of a relative or significant other.

By: Cynthia W. Veidt, cindy@lpvlaw.com

What is a “Declaration of Guardian?”

Another method for people to address potential injury, illness, or incapacity is by creating a “declaration of guardian” in advance, to ensure that a trusted individual will be appointed to make medical and financial decisions in the event that you are no longer able to make them for yourself. Texas law also permits people to designate the future guardian of their children.

You can designate separate guardians over your estate (i.e., the guardian who will handle your property and manage your financial affairs) and over your person (i.e., the guardian who will make medical decisions for you and oversee day-to-day decisions about your personal care, including living arrangements).

If you have not executed a declaration of guardian or a power of attorney before you become incapacitated, a court may need to appoint a guardian to make medical and/or financial decisions for you. This can be an expensive process, and often leads to (or results from) family disagreements about how best to care for their loved one; attorneys often recommend executing a declaration or power of attorney in order to resolve these potential issues before the need arises. However, care should be taken when you execute both a declaration of guardian and a power of attorney. You do not want to inadvertently give multiple persons the same legal rights to manage your affairs as a result of conflicting documents.

What is a “Power of Attorney?”

Texas law allows a person (known as the “principal”) to create various types of “Power of Attorney,” which can take effect immediately or only upon the principal’s injury, illness or incapacity. Using a “power of attorney,” the principal names another individual (known as the “agent” or “attorney in fact”) who will be authorized to handle the principal’s financial affairs or make medical decisions for the principal. These powers of attorney can be as broad, or as limited, as needed in anticipation of future events.

Powers of attorney are one method to protect yourself, and your loved ones, in the event of future injury, illness, or incapacity; in particular, making these decisions in advance can greatly aid you and your family in seeking assistance through Medicare, Medicaid and similar programs.

Careful thought and planning are recommended when making such decisions, however. An agent under a general power of attorney can alter the principal’s existing estate plan in a number of ways, including for example: (a) changing beneficiary designations on insurance policies, bank and brokerage accounts, or retirement plans; (b) selling or transferring the principal’s property without the principal’s prior knowledge; or (c) withdrawing money held in the principal’s accounts without the principal’s prior knowledge. Because of the potential for “abuse” by an agent, many financial institutions and other businesses are often reluctant to recognize a general power of attorney except under very specific circumstances.