by Lora G. Davis
Avid readers of the Dallas Bar Headnotes may recall past articles highlighting the difficulty in using durable powers of attorney (DPOAs) in Texas due to the ability of banks and other institutions to reject those powers for any reason, or for no reason at all. After several attempts at statutory changes to address these issues, we received an early holiday gift in the form of HB 1974 and the new Texas Durable Power of Attorney Act (Act).
The Act expands the powers and duties of agents. New provisions allow agents to name successor agents, receive compensation, create or revoke trusts, make gifts, create or change survivorship and beneficiary designations, and delegate authority under the DPOA. Caution must be taken in implementing these Spiderman-like powers, because “with great power comes great responsibility.” In addition, adverse tax consequences can arise with the gifting powers making careful consideration essential. For DPOAs executed after September 1, 2017, an agent will not be considered a fiduciary to the principal unless he or she has accepted and is acting as an agent (overturning contrary case law).
The biggest change to the Act is the inclusion of acceptance and reliance provisions. The new provisions are intended to balance the rights of principals and those asked to rely upon the DPOAs so that DPOAs can be used for their intended purpose and third parties will be reasonably protected from liability when accepting them.
Generally, a party presented with a DPOA must either accept the DPOA within a reasonable time or reject the DPOA with a written explanation of the reason for rejection. A party has 10 business days to accept or reject a DPOA or to ask for an agent’s certificate (as to a factual matter) or an opinion of counsel (as to a legal matter). If a certificate or opinion is requested, the DPOA must be accepted or rejected within 7 business days after receipt of the requested document. If a DPOA has language other than English, a translation can be requested and if the request is within the 10 business day timeframe the DPOA will not be considered presented until the translation is received.
If a party accepts a DPOA in good faith, the party can rely on a presumption that the signature is genuine, the power is valid and has not been terminated, and that the agent is not exceeding his or her scope of authority. A party who accepts an agent’s certification, an opinion of counsel, or a translation can rely on it without further investigation.
The statutory reasons for rejecting a DPOA are too numerous to list in detail here. Generally, a DPOA can be refused if the party has a good faith belief or knowledge that the DPOA is no longer valid, the agent is exceeding his or her scope of authority, or something else seems awry. Specifically, if elder financial abuse is suspected the DPOA must be rejected and the suspected abuse must be reported. A special provision allows a party to reject a DPOA without stating the reason for rejection if the principal or agent is suspected of criminal activity or if the party had filed a suspicious activity report on the principal or agent. A DPOA can also be rejected if a request for a certificate or opinion is refused or the certificate or opinion is unclear or qualified in a manner that makes it ineffective.
It is important to note that “not on our form” or “too old” are not valid reasons to reject a DPOA. In addition, filing in the deed records cannot be required unless recording is otherwise required (e.g., real property transactions or other law).
The Act includes provisions to force acceptance of a valid DPOA and recovery of costs and fees through a court proceeding. Note, however, that the Act includes a “loser pays” rule, so that if the party asked to accept the power is sued and the court finds the party had a valid reason to reject the power, then the party can recover costs and fees from the principal.
A careful reading of the new Act is strongly recommended, as there have been numerous changes not discussed in this article. For a more detailed discussion of the Act, see the Probate, Trusts & Estates Section webpage (New Improved DPOA Act Outline from 9-25-17 Meeting). In all events, using your “Spider-Sense” (or brainpower) to customize DPOAs will yield the best result for your client.
Lora G. Davis is a partner at Davis Stephenson, PLLC, and can be reached at firstname.lastname@example.org.