Chapter 5-2 The Power of Attorney

• Jurisdiction: United States

5-2 The Power of Attorney

With a Power of Attorney, an individual selects a representative to assist him or her with financial and property matters.¹ The individual ("the principal") delegates to the representative ("the agent" or "attorney in fact") whatever powers the principal feels the agent will need to properly manage the property.

Many powers of attorney are written to grant very broad powers to the agent. However, the principal may, if he or she wishes, grant very narrow powers to the agent, and be very specific in detailing what the agent is to do. Generally, however, for estate planning purposes, the powers granted are extensive, allowing the agent great flexibility.

5-2:1 Types of Powers of Attorney

Financial powers of attorney may be broken down into two types: "regular" and "durable."

5-2:1.1 Regular Power of Attorney

A regular power of attorney is based on the common law of agency and on statutes about agency. Pursuant to this law, a principal appoints an agent whose authority can be exercised only while the principal has capacity to undertake the same action. Hence, if the principal cannot do something for himself or herself, the agent cannot do it either. Stated another way, if the principal becomes disabled in any way, the agent can no longer act on the principal's behalf. This is problematic in the estate planning context. After all, if the principal becomes disabled, he or she truly needs someone to act on his or her behalf. Alas, this is just when the regular power of attorney vanishes!

Dissatisfied, states began devising ways to create a document whereby an agent would be able to act on behalf of a principal who lacked competency. In 1954, Virginia became the first state to authorize a durable power of attorney which provided that the agent retained the authority to act even if the principal lacked competency.²

5-2:1.2 Durable Power of Attorney

The most significant difference between a regular power of attorney and a durable power of attorney, then, is this: a durable power of attorney remains in force even if the principal becomes disabled.³ Moreover, a durable power of attorney does not lapse because of the passage of time unless the instrument creating the power specifically states a time limitation.⁴ Indeed, unless the principal revokes it or a court of competent jurisdiction acts to effectively revoke it, the power of attorney remains in effect and continues to work until the principal's death.

However, the common law did not create the durable power of attorney; it was created by statute. Hence, to create and use a durable power of attorney, the client—or his or her attorney—must carefully follow the instructions provided by the statute.

5-2:2 Fundamental Requirements of the Durable Power of Attorney

The Texas statute⁵ requires few formalities to create a durable power of attorney. Essentially, the principal must "write out" his or her instructions, date it, sign it, and have it notarized.⁶ The statute does not require that the instrument have any witnesses.⁷

To assist people in creating the durable power of attorney, the legislature created a form called the "Statutory Durable Power of Attorney."⁸ A copy of this form is contained in Appendix 7. However, the form and its wording are not exclusive, and attorneys are free to draw up their own or to use other formats, so long as the wording used complies substantially with the wording prescribed by Texas Estates Code § 752.051.⁹

The statute does not require that the durable power of attorney be filed with the County Clerk. However, if the agent uses the power with respect to a real property transaction, he or she will then need to record the power of attorney with the County Clerk's office in the county where the real property is located.¹⁰ The 2015 Texas Legislature mandated that such a power be filed no later than the 30th day after the filing of the real...