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” 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 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.
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.