Texas estate planners have long known a dirty little secret: the durable power of attorney has the legal substance of a wisp of smoke. That is because no one, even banks and investment companies, has been required to honor it.
Until recently. On September 1, 2017, a sweeping new law took effect that requires third parties to accept a durable POA.
True, it has taken 4 legislative sessions to get to this point, but we’re not going to be bitter, are we? It would be a waste of time to talk about banks that have arbitrarily refused to accept a POA more than 5 years old and investment companies that will only accept a POA signed in their offices on their secret, internal form. We won’t mention how many seniors have been forced into guardianships because of corporate caprice.
Nope, we are simply going to bask in the temporary glow and note that even though 30 states have gone before us in passing similar laws, we’re still ahead of the other 19. A bit late to the party, but the invitation is still good.
A person (the principal) signs a durable power of attorney to delegate to someone (an agent) the power to handle certain financial transactions. When the POA is presented to a third-party it now has 3 choices – to accept it, to request that the agent sign a certificate, or to request the agent provide an opinion of counsel. There are time periods attached which can be extended by agreement of the parties.
The third-party can only refuse to accept the POA for one of the 11 reasons set out in the statute. If the third-party refuses, then it has to give the agent a written Private Reason Affidavit, which is signed under penalty of perjury. If the third-party fails to timely give a Private Reason Affidavit, the agent or principal can sue for an order requiring that the POA be accepted, attorneys’ fees and costs.
The 11 reasons to deny the POA read like a cautionary tale in elder abuse, contracts and fraud. The third-party is not required to establish a new customer relationship for the principal or expand one that already exists. It is not required to do business with a principal or agent who has a prior criminal history involving financial crimes, or with whom it has previously litigated. It does not have to engage in a transaction that would violate Texas or federal law, regulation or ordinance. If there are co-agents and they give conflicting directions, then the third-party can refuse to accept the POA. If the third-party is aware of a claim that the principal is being abused financially or physically, or that there is a court case calling the POA into question, then it can refuse to accept the POA. There are excuses for good faith belief, out of state POAs, unclear attorney opinion certificates and POA termination.
Take the time to read HB 1974. It is that important.
Hammerle Finley Can Help You Define Personal Property
Interestingly, the same interpretation can be made of someone’s blanket assignment to the trust of all their personal property. People sign those broad assignments routinely when a trust is formed. Make sure you truly mean what you sign. There are consequences to words.
To ensure that your will means exactly what you want it to, you may need to hire an attorney to help you with your estate planning. Contact the experts at Hammerle Finley Law Firm today.
Virginia Hammerle is an accredited estate planner and represents clients in estate planning, probate, guardianship, and contested litigation. She may be reached at legaltalktexas@hammerle.com. This blog contains general information only and does not constitute legal advice.
