Financial Power of Attorney
A financial power of attorney (POA) is a written document where you (called the principal) name an agent and give that agent the authority to act on your behalf on specified financial matters. The power exists until: (i) you revoke it; (ii) it is revoked as a matter of law; or (iii) your death. The POA is also revoked if you become incapacitated unless you provide otherwise in the POA. A POA that continues to be effective during your incapacity is called a durable POA.
The agent is like a trustee in that the agent, when acting for the principal, cannot take actions that benefit the agent to the detriment of the principal or the principal’s estate.
Limited POAs. POAs that are limited to certain transactions (for example, a closing on the sale of a house) or certain financial accounts (for example, giving access to financial or retirement accounts) are common. Many of us have named an agent and granted limited powers without realizing we were actually signing a POA.
POA with Broad Powers. This is the type of POA often recommended as part of an estate plan. It grants the agent broad powers to act on the principal’s behalf and is effective even if the principal is incapacitated (durable POA).
Why do I need a POA? You need a POA to allow a family member or trusted friend to continue to care for you if you are unable to care for yourself due to physical or mental incapacity. Without a POA, in the event of incapacity, a family member’s only recourse may be to ask a court to appoint a guardian with authority to act on your behalf. Guardianships are expensive (the costs come out of your pocket), often contentious, and require ongoing court supervision.
What is a Statutory Durable Power of Attorney (SDPOA)?
It is the public policy of the State of Texas to limit the use of guardianships whenever possible. The state promotes this policy by creating alternatives to guardianship in the case of incapacity. The SDPOA, a legislatively adopted power of attorney form granting broad financial powers, is one of the most important of those alternatives.
A signed SDPOA grants an agent the powers listed in the document as those powers are further defined and expanded by language in the law creating the form. The legislature did this to shorten the form but still provide broad powers. The job of the attorney is to ensure you understand the powers you are granting, understand the choices contained in the form, and suggest additions or deletions.
Recent legislative changes have added to the SDPOA form powers to manage one’s digital accounts and other digital assets, as well as increase the likelihood that others will accept the SDPOA and recognize an agent’s authority. These changes took effect September 1, 2017.