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Revised Durable Power of Attorney | Probate Law | Farrow-Gillespie Heath Witter LLP

Revised Durable Power of Attorney Act

Many sign a Durable Power of Attorney (DPOA) in order to name an agent to handle their finances in case of future illness or incapacity. On November, 1, 2017, the Texas Legislature revised the Texas Durable Power of Attorney Act. The revisions address a frustrating and common problem encountered by Texans attempting to act under a durable power of attorney: third parties (including but especially financial institutions) who reject a valid durable power of attorney with no explanation or request impossible demands. It was not uncommon for a third party to reject a power of attorney and insist that the principal, the maker of a DPOA, execute another “form” provided by the third party. Executing such a form, of course, is not possible when the principal has lost the capacity necessary to execute such a document. The revisions, which apply to all powers of attorney whether executed before or after the revisions, take a “stick and carrot” approach to ensuring third parties recognize durable powers of attorney.

The Carrot

The “carrot” provides that if a durable power of attorney is accepted by a third party “in good faith and without actual knowledge that the durable power of attorney is void, invalid, or terminated, that the agent’s authority is void, invalid or terminated, or that the agent is exceeding or improperly exercising the agent’s authority, the person may rely on the power of attorney and the agent’s authority as if it were genuine, valid, and still in effect.” Put simply, third parties relying on a durable power of attorney in good faith won’t be held liable if that document later turns out to be invalid.

The Stick

The revised Act provides limited circumstances in which a third party may refuse a power of attorney and a time limitation for doing so. It also allows a third party to request a certification from the agent or an attorney’s opinion on any particular power of attorney. The “stick” authorizes the agent of the DPOA to sue any third party who does not timely accept or reject a power of attorney, or who rejects a power of attorney for an improper reason. The agent also is entitled to recover reasonable and necessary attorneys’ fees.

Additional Revisions

The revisions also change the statutory durable power of attorney form in helpful ways, such as utilizing the term “termination” where it once used “revocation,” which clarified that a principal may terminate an agent’s authority without terminating the authority of other agents appointed under a common power of attorney.

The revisions are a result of an endeavor by Real Estate, Probate, and Trust Law (REPTL) Section of the State Bar of Texas. While the revisions are still fairly new, agents under a durable power of attorney can act with confidence that third parties will accept a valid power of attorney.

If you or someone you know has had problems with persons, third parties, or companies accepting a power of attorney, an experienced probate attorney can assist. These situations can often be resolved without the necessity of a lawsuit.

Elder Law | Farrow-Gillespie Heath Witter LLP | Dallas, TX

Power of Attorney Liability

A person (“agent”) holding a power of attorney for another person (the “principal”) must act with the utmost degree of loyalty to the principal.  The agent must avoid being involved in any transaction which benefits, or even which potentially benefits, the agent.

That rule of law was enforced once again in 2015 by the Texas courts in Jordan v. Lyles, No. 12-13-0035-CV, 2015 WL 393791 (Tex. App.–Tyler 2015, no pet. h.).

In that case, the agent used her power of attorney to place a significant portion of the principal’s money into pay-on-death accounts naming the agent as the beneficiary.  At the principal’s death, the principal’s other heirs sued the agent for breach of fiduciary duty for moving the money and receiving it at the principal’s death.  A Tyler jury found in favor of the heirs, and held the agent liable for breach of fiduciary duty and tortious interference with inheritance rights. The appellate court affirmed the jury’s verdict.

The moral to agents is this: If you conduct or participate in a transaction for the principal that benefits you personally, obtain bulletproof evidence that the principal instructed you to do so.  If the principal has lost capacity, it is too late; and unless you obtain the advance approval of all beneficiaries under the principal’s will (or all heirs at law if the principal has no will or has a questionable will), you simply may not do anything with the principal’s property during the remainder of the principal’s lifetime that would be to your benefit.