The 2017 Amendments to the Texas Durable Power of Attorney Act: Good News for Estate Planners
A durable power of attorney (“POA”) allows someone else, known as the “Agent”, to make certain decisions on your behalf (the “Principal”) including important decisions on medical treatment and financial issues. Since it is durable, it continues in effectiveness even if you become mentally incompetent to make your own decisions or if you cannot communicate your wishes.
In Texas, the effectiveness of a durable power of attorney is governed by state law. Complaints about Texas durable power of attorney law have long been simmering. In 2017, the legislature responded with amendments that greatly increase the effectiveness of this critical estate planning instrument. The amendments went into effect on September 1.
Third Party Acceptance
Perhaps the biggest complaint about the old law was that third parties, such as banks, were not required to honor it. If the third party refused, or if it placed conditions on acceptance (by requiring that it be signed on their own forms, for example), the durable POA became useless. Many Principals have been forced to establish guardianships for this reason.
The new law strictly limits the ability of a third party to refuse to honor a durable POA. Upon being presented with one, a third party must choose from among four options:
- Accept it unconditionally;
- Accept it only if the Agent signs it;
- Accept it only after the Agent produces a Certificate or an opinion issued by the Agent’s lawyer attesting to its validity; or
- Reject it for one one of certain specified reasons set out in the law. In this case it must also issue the agent a written Private Reason Affidavit.
The third party is bound by strict deadlines that limit its ability to unreasonably delay acceptance of the durable POA. The new law grants the Agent the ability to sue a third party who refuses to accept a durable POA for a (i) court order requiring its acceptance and (ii) recovery of attorney’s fees and costs.
Grounds for Refusal
The following are the major grounds that justify a third party’s refusal to honor a durable POA under the new law:
- The third party would not be legally required to engage in the transaction at issue if you were acting personally rather than through your Agent (the establishment of a new bank account, for example).
- Compliance would violate the law, public policy or a request from the police.
- The Agent’s Certificate or the opinion of the Agent’s lawyer is deficient in some way (the objection must be reasonable, however).
- The third party has knowledge that the durable POA is invalid or that its validity is being litigated, or the third party is subject to inconsistent instructions from two or more Coagents.
- You or your Agent has a criminal history involving financial crimes, or that it has previously litigated against you or your Agent.
- The third party is aware that you are being abused, either physically or financially
A third party can defend itself against refusing to honor a durable POA even when one of the foregoing grounds was not present as long as it had a “good faith belief” that such a ground was present.
Other Features of the New Law
The new law offers many more conveniences to principals and agents, including:
- A durable POA created in another state is valid in Texas as long as it complies with that state’s laws or with federal law.
- As the Principal, you can select the state law under which you wish the durable POA’s language to be interpreted – it doesn’t have to be Texas even if you reside in Texas. If no preference is stated in the durable POA, then the law of the state of your residence or where you signed it will apply.
- A new durable POA doesn’t automatically revoke an old durable POA unless the new durable POA revokes it specifically.
- A photocopy or computer scan of a durable POA is just as legally valid as the original unless the durable POA itself states otherwise.
- Your legally notarized signature is presumed valid. To deny it, a third party must prove the signature is invalid. This prevents a third party from demanding that your durable POA be recorded with the county clerk unless this is already required by another law.
- You are entitled to appoint more than one Agent, and these Agents can act independently of each other unless the durable POA states otherwise.
- You can name someone to appoint additional Successor Agents.
- You may authorize your Agent to delegate authority to a third party such as a bank.
- You may authorize your Agent to create a living trust, name beneficiaries, or even make gifts out of your assets.
Modifying Your Durable POA
If your durable POA was signed before September 1, 2017 (the day he new law went into effect), it may need to be modified. For example:
- You might want to appoint another Agent, and to specify whether your Agents are entitled to act independently of one another.
- You might want to name someone to appoint new Successor Agents on your behalf.
- You might want to grant your Agent additional authority that was forbidden under the old law, such as the authority to delegate his own authority or the authority to create a living trust from your assets.
Even if you find no need to modify you current durable POA, you can rest assured that the likelihood that it will be accepted by a third party is far greater than it ever has been before in Texas.
Contact Romano & Sumner for Your Estate Planning Needs
If you live in or near Sugar Land, including Mayfield Park, Ragus Lake Estates, First Colony, Sugar Lakes, or elsewhere in town, contact the attorneys at Romano & Sumner immediately for your estate planning needs. We can schedule you a free initial consultation to answer your questions. We can be reached using our online contact form or by telephone at (281) 242-0995.