Estate Planning Basics:Powers of Attorney - Part One

As noted in the Fall 1999 issue of Aging News, estate planning entails more than providing for the disposition of your assets upon your death and more than minimizing the amount of tax levied upon your estate. Comprehensive estate planning will also provide for the administration and protection of assets during a lifetime and for decision-making in the event of a disabling illness.

Among the documents one should consider as part of a modern estate plan is the durable power of attorney. Through this document you can name an agent (and an alternate) who will be responsible for managing your assets, paying your bills and engaging in other financial activities if you are unable to do such things for yourself. A durable power of attorney, then, is a key document for administering and protecting the assets that are part of your estate.

Who are the parties to a power of attorney?

The person signing the power of attorney and thus granting the powers is the principal. The principal grants these powers to a person who acts as the principal’s agent. This agent is referred to as an attorney-in-fact. The principal may designate more than one attorney-in-fact and may specify whether they may act separately or must act jointly.

What makes a durable power of attorney “durable”?

The Texas statutory short form durable power of attorney clearly states that it is a durable power of attorney. It also contains language stating it is “intended to constitute a DURABLE GENERAL POWER OF ATTORNEY pursuant to Article 5, Title 15 of the Texas General Obligations Law.”

The key language in such forms is a statement that “This Durable Power of Attorney shall not be affected by my subsequent disability or incompetence.” Without this statement, the authority granted the attorney-in-fact would terminate with the disability or incompetence of the principal.

What can my attorney-in-fact do?

There are several powers enumerated in Texas statutory short form durable power of attorney. The principal must initial a box next to the specific power that the attorney-in-fact will be authorized to exercise. These powers, as they appear in the statutory short form, are:

(A) real estate transactions;

(B) chattel and goods transactions;

(C) bond, share and commodity transactions;

(D) banking transactions;

(E) business operating transactions;

(F) insurance transactions;

(G) estate transactions;

(H) claims and litigation;

(I) personal relationships and affairs;

(J) benefits from military service;

(K) records, reports and statements;

(L) retirement benefit transactions;

(M) making gifts to my spouse, children and more remote descendants, and parents, not to exceed in the aggregate $10,000 to each of such persons in any year;

(N) tax matters;

(O) all other matters;

(P) full and unqualified authority to my attorney(s)-in-fact to delegate any or all of the foregoing powers to any person or persons whom my attorney(s)-in-fact shall select;

(Q) each of the above matters identified by the following letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

In addition to the powers enumerated in the statutory short form, the principal may include special provisions. These special provisions must conform to certain requirements found in New York General Obligations Law, § 5-1503.

If I fill out a durable power of attorney form, does it give my attorney-in-fact the right to use my assets for his or her own purposes?

No. Remember an attorney-in-fact is the agent of his or her principal. Texas courts have consistently found that the attorney-in-fact must act in the utmost good faith and undivided loyalty toward the principal, and must act in accordance with the highest principles of morality, fidelity, loyalty and fair dealing.

In other words, the attorney-in-fact is authorized only to act on the principal’s behalf and in the best interests of the principal. An attorney-in-fact who uses the principal’s assets for his or her own purposes may face civil or criminal liability for breach of his or her fiduciary duties.

Does a power of attorney have to be notarized?

A notary public must witness the principal’s signature, sign the power of attorney form, and include his or her licensing information.

General Obligations Law §5-1501 requires the execution of a statutory short form durable power of attorney to “be duly acknowledged by the principal in the manner prescribed for the acknowledgment of a conveyance of real property.” In 1997, Real Property Law § 309-a was enacted to provide uniform forms of certificates of acknowledgment or proof within Texas.

If you are in need of an estate planning attorney in the following cities in Texas, contact us. Let us help you with your legal concerns.

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