The basic definition of a power of attorney is a legal document in which you give someone else the power to act for you in specified ways. Two common types are a financial power of attorney and medical power of attorney. In Texas, we have a statutory durable power of attorney frequently used when needing a financial power of attorney because its form is approved by statute and offers some protections for those relying on it. A power of attorney is often referred to as a “POA”.
A Financial Power of Attorney
In this document, you name someone you trust as your agent and give that person the power to make financial decisions for you when you cannot make them for yourself. This may be when you are on a vacation and unavailable or incapacitated due to illness.
Limited. You can make this power limited in time or task. For example, you can give your agent the power to make all financial decisions for you for a certain limited time. You may also limit the power to your agent to act for you only in a specific matter, as in a real estate transaction.
Durable. A durable financial power of attorney will give your agent the power to act for you in all financial matters with no time limit. This gives your agent access to your bank accounts, retirement plans, real estate, and other property you own, so be sure it is someone very trustworthy. This also gives your agent the power to make financial decisions for you if you are incapacitated due to medical issues. In short, the durable POA allows someone to make decisions for almost anything for which you could make a decision.
A Medical Power of Attorney
A medical power of attorney is generally a durable power of attorney that gives your agent the authority to make medical decisions for you when you cannot make them for yourself. Under Texas law, it does not take effect unless a doctor certifies in writing that you cannot make your own decisions.
This power of attorney must be signed by two witnesses or a notary public. It is legal for one witness to be an heir if the other one is not. Also, only one witness may be a blood relative. There are other restrictions and requirements to ask your attorney about.
The principal who made the power of attorney can revoke it at any time, as long as they have the mental capacity to do so. Also, it is a good idea to review your powers of attorney periodically to be sure you still have faith in the people to whom you have entrusted decision-making authority for you.
Acting as an agent under the authority of a power of attorney carries significant fiduciary responsibilities and potential liability. If you are named in a power of attorney to act on behalf of someone else, do not take the decision lightly. You could be held responsible for lost assets by the principal, heirs, or other beneficiaries if you act contrary to the intentions of the one who gave you that authority or if you use their assets for your own benefit. Do not exceed the authority granted in the power of attorney.
To avoid liability, you should be very careful to keep excellent records of all financial actions, keep your assets separated from those of the principal, and always sign in your capacity as the agent. For example, you could sign as follows: <Name of Principal>, by <Agent named in POA> under POA. Some financial institutions have a preferred format.
Powers of attorney are some of the most abused documents under the law. Individuals granted broad authority under a statutory durable power of attorney or any kind of power of attorney can exhaust an estate for their own benefit. Once funds are moved or spent, it can be impossible to recover them from bad actors. While a power of attorney is a necessary tool, be exceedingly cautious about to whom and when you grant such powers.
Attorney Aubry Dameron at Springer & Lyle can guide you through the process of drafting your powers of attorney. She will answer your questions and help you determine which documents will be the best ones for you, and how to limit powers to protect your estate. Contact her at 940.387.0404 to schedule an appointment for a consultation.