A Deep Dive into the Texas General Power of Attorney

 

Life is unpredictable, and while we all hope for smooth sailing, preparing for unforeseen circumstances is a cornerstone of responsible adulting. In Texas, one powerful tool in your estate planning arsenal is the Power of Attorney (POA). Among the various types, the General Power of Attorney holds a significant place, granting broad authority to a trusted individual. But like any powerful instrument, it comes with its own set of advantages and considerations.

What is a Texas General Power of Attorney?

At its core, a Power of Attorney is a legal document where you, as the "principal," designate another person, known as your "agent" or "attorney-in-fact," to act on your behalf. A General Power of Attorney (GPOA) in Texas grants your agent wide-ranging authority to manage your financial, business, real estate, and legal matters. This means they can handle everything from paying bills and managing investments to buying or selling property and dealing with legal obligations. The powers granted are typically very broad, limited only by the terms you specifically set within the document or by Texas law.

The Pros of a Texas General Power of Attorney

1. Comprehensive Financial Management: The most significant advantage of a GPOA is its extensive reach. If you're traveling for an extended period, dealing with a temporary illness, or simply need assistance with your daily financial affairs, a GPOA allows your agent to step in seamlessly. This ensures your bills are paid, investments are managed, and properties are maintained without interruption.
   
   
2. Convenience and Flexibility: Imagine needing to sign a deed while out of the country or managing a business remotely. A GPOA empowers your agent to act on your behalf, providing crucial flexibility and convenience in situations where your physical presence isn't possible.
   
   
3. Avoiding Court Intervention: Without a GPOA, if you become incapacitated and unable to manage your own affairs, your loved ones might have to go through a lengthy, costly, and emotionally taxing court process to have a guardian appointed. A GPOA can help you bypass this, allowing your chosen agent to immediately take over your financial responsibilities.
   
   
4. Peace of Mind: Knowing that your financial matters are in capable hands, even when you can't attend to them, offers immense peace of mind. This is particularly true for individuals who travel frequently, have complex financial portfolios, or are anticipating a period of limited capacity.

The Cons of a Texas General Power of Attorney

1. Termination Upon Incapacity: This is arguably the most critical limitation of a General Power of Attorney in Texas. Unless specifically drafted as "durable" (a crucial distinction we'll touch on in our next post), a GPOA automatically terminates if the principal becomes mentally or physically incapacitated. This means if you have a GPOA and then suffer an incapacitating illness or accident, your agent loses their authority precisely when you might need it most.
   
   
2. Risk of Abuse: Granting broad powers to an agent carries an inherent risk. If you choose an untrustworthy individual, they could potentially misuse their authority, mismanage your assets, or even engage in financial abuse. This underscores the paramount importance of selecting the right agent.
   
   
3. Loss of Control (During Use): While the intent is to protect you, when the GPOA is active, you are essentially delegating significant control over your financial and legal decisions to another person. While you can revoke the GPOA as long as you have the mental capacity to do so, it's a dynamic to be aware of.
   
   
4. Potential for Misinterpretation or Disagreement: Even with clear instructions, an agent might interpret your wishes differently than you intended or make decisions you wouldn't have made. If you have multiple agents, disagreements among them can lead to delays or conflicts, potentially requiring court intervention.
   
   
5. Acceptance by Third Parties: While legally valid, some financial institutions or other entities may be hesitant to accept a GPOA without additional assurances, such as an attorney's affidavit confirming your capacity at the time of signing, or specific language granting certain powers.

General Power of Attorney vs. Durable Power of Attorney: A Crucial Distinction

It's vital to understand the difference between a General Power of Attorney and a Durable Power of Attorney in Texas. The key differentiator lies in what happens if you become incapacitated:

• General Power of Attorney: As mentioned, it terminates upon your incapacitation. It's best suited for temporary situations where you need assistance but retain full mental capacity.
  
  
• Durable Power of Attorney: This type of POA remains in effect even if you become incapacitated. This is why a Durable Power of Attorney is a cornerstone of most comprehensive estate plans, as it provides continuous financial management during times of vulnerability. Many "general" POAs are drafted to also be durable.

For robust long-term planning and protection against unexpected incapacitation, a Durable Power of Attorney (often referred to as a Statutory Durable Power of Attorney in Texas) is generally recommended over a non-durable General Power of Attorney.

Who Should You Consider as Your Agent?

Choosing your agent is perhaps the most critical decision when establishing any Power of Attorney. This person will wield significant authority, so their trustworthiness, judgment, and ability are paramount. Here are key qualities to look for and considerations:

1. Trustworthiness and Integrity: This is non-negotiable. Your agent will have access to your finances and potentially your most sensitive information. Choose someone with a proven track record of honesty and ethical behavior, free from any conflicts of interest.
   
   
2. Financial Acumen (for financial POAs): If the GPOA covers financial matters, your agent should be financially responsible, organized, and capable of managing money. They don't need to be a financial wizard, but they should understand your financial situation and be able to handle tasks like paying bills, tracking expenses, and interacting with banks and financial advisors.
   
   
3. Reliability and Availability: Your agent needs to be accessible and willing to serve. They should be able to respond promptly to your needs and understand the responsibilities involved. Discuss this with them beforehand to ensure they are genuinely prepared to take on the role.
   
   
4. Good Communicator: The ability to communicate effectively with you (while you have capacity), with financial institutions, and potentially with other family members, is crucial. They should be able to convey information clearly and respectfully.
   
   
5. Emotional Stability and Sound Judgment: In potentially stressful situations, your agent needs to remain calm, rational, and focused. They should be able to make difficult decisions without being swayed by emotion or personal gain.
   
   
6. Understanding of Your Wishes and Values: While your agent will have authority, it's ideal if they understand your preferences and values, especially regarding financial management or end-of-life decisions if the POA extends to healthcare matters (though a separate Medical Power of Attorney is usually recommended for this).
   
   
7. Geographical Proximity (Ideal, but not mandatory): While not strictly required, having an agent who lives relatively close can simplify matters, especially in emergencies or when in-person signatures are needed.

Who to generally consider:

• Spouse or Partner: Often the first choice but assess their financial skills and willingness to take on the responsibility.
  
  
• Adult Children: Can be excellent choices, particularly if they are responsible and understand your affairs. If you have multiple children, consider naming one as the primary agent and others as successors to avoid potential conflicts.
  
  
• Siblings or Close Friends: A trusted sibling or a close friend who knows you well and possesses the necessary qualities can also be a strong candidate.
  
  
• Professional Fiduciary or Trust Company: For individuals with complex estates or no suitable family members/friends, a professional fiduciary or trust company can serve as an agent. This ensures professional management but comes with fees.

Who to generally avoid:

• Anyone you don't implicitly trust.
• Someone with a history of poor financial decisions or legal troubles.
• Anyone who might have a conflict of interest (e.g., someone who stands to gain significantly from your estate in a way that might conflict with your best interests).
• Anyone unwilling or unable to serve.

Conclusion

A Texas General Power of Attorney, particularly when drafted as a Durable Power of Attorney, is a vital component of a comprehensive estate plan. It offers the assurance that your financial and legal affairs will be managed by someone you trust, even if you become unable to do so yourself. However, the breadth of power it grants necessitates careful consideration of its limitations and, most importantly, the meticulous selection of your agent. By understanding these nuances and choosing wisely, you can empower yourself with peace of mind, knowing that your future is in capable and caring hands. Howell Legacy Planning can help you craft a Power of Attorney that aligns perfectly with your specific needs and wishes and complies with all state laws.

 

Announcing the Formation of Howell Legacy Planning!

 I'm excited to announce that after many years of practicing with large law firms, as well as acting as a director for a large financial firm's multi-family office, I am starting my own law firm, Howell Legacy Planning.

You can visit our web site here:  Howell Legacy Planning

Howell Legacy Planning can handle:

• Estate Planning
• Probate
• Guardianships
• Trusts
• Powers of Attorney
• Directive to Physicians
• Beneficiary Designations
• Retitling of Assets
• Family Office Consulting

We hope you find value in the posts on this blog, and if you need assistance with your estate planning or probate needs, or if you have questions about your particular situation, you can schedule a free consultation on our web site.

Thanks in advance for visiting our site!

What Were They Thinking? Why Self-Written Wills are a Bad Idea

 

I wanted to share a couple of problems which came across my desk recently which serve as warning signs to people who attempting to prepare their own Wills, either handwriting them out or using software that purports to handle these types of documents. 

Both of these were prepared and executed by people on their own without legal counsel.

The first was a Will that by and large was correct in the body of the Will. However, when it came to the signatures, I found a problem. In Texas, a typewritten Will (which this was), has to be signed by the Testator (the person creating the Will) and witnessed by two individuals above the age of 14. Texas also has a provision where the Testator and the witnesses can sign what is known as a "self-proving affidavit," which allows the Will to be probated without the necessity of the witnesses having to come to court and give testimony that they were present when the Testator signed the Will, that the Testator was above the age of 18 and of sound mind, etc.

Unfortunately in this situation, the Testator signed the Will and the self-proving affidavit, but the witnesses only signed the affidavit--there were not even any signature lines for the witnesses on the Will (I will add here that the Testator who prepared the Will was a patent attorney, which only goes to prove that lawyers are their own worst clients). Prior to 1991, this would have rendered the Will completely invalid. Fortunately, Section 59 of the Texas Estates Code was changed in 1991 to provide that in this type of situation, the witnesses' signature to the affidavit will be considered a signature to the Will if necessary to prove that the Will was signed by the Testator, but the Will can no longer be considered self-proven, meaning that either one or both of the witnesses to the affidavit will have to give testimony in court as to the execution of the Will, or two witnesses will be needed to prove up the Testator's handwriting. 

Moral: Make sure that you have the Testator and the witnesses sign not only the Will, but also the self-proving affidavit. Added notes: make sure the witnesses are over the age of 14, and not related to the Testator or a beneficiary under the Will.

Second problem I encountered:

A gentlemen died with an estate of approximately $2 million. His son brought me the Will, which had been prepared by his father, using forms he had cobbled together from form books and other people's Wills, apparently. 

Dad's first wife had died and he subsequently remarried, so he wanted to make some provisions for the second wife, who did not get along at all with Dad's children. Dad started out by making some specific bequests worth about $250,000 to his children. In the next Article, he left "all my remaining property in trust for my wife for her lifetime." The rest of the Article provides the terms of the trust, which on termination was to be paid to her estate (note: doing this would certainly cut his children off from this share of his estate, since it is very unlikely she would leave any of this property to Dad's children).

The next Article is where things get unusual. It provided that he left "all the rest and remainder of my property to my children in equal shares." He now has created, in effect, two residuary clauses leaving all his property in very different ways. It is painfully obvious that he had no idea what he had written and the amount of conflict and confusion that would cause. 

It was unclear who was to receive the residuary estate, so we had to file what is known in Texas as a Petition for Declaratory Judgment with the probate court to have the court determine who the proper recipient of the residuary estate will be. 

Sometimes, in a case like this, you could go back to the attorney who drafted it and ask: What happened here? What did you mean? What do your notes say? Such extrinsic evidence would normally be admissible if the intent cannot be gleaned from the plain reading of the Will. However, in this case, the drafter of the Will was the Testator, and his intent died with him, so we will have to resort to other means to determine the ultimate beneficiaries. 

Moral: Don't be penny wise and pound foolish when it comes to drafting such an important document such as your Will. Get competent legal counsel to help in drafting your documents--and don't forget to read what they have drafted! Ask questions--what does this mean? Show me the Articles where the property gets distributed. What happens is this person does not survive me? You've worked hard to acquire your assets. Don't inhibit your plans for these assets with second-rate software where you can draft your own Wills or with attorneys whose specialty is not in the estate planning area.

What Happens If You Die Without a Will as a Texas Resident?

 

If you pass away without a Last Will and Testament in Texas, the state's intestacy laws come into play to determine how your estate will be distributed. This process can be complex and may not always align with your wishes. Understanding these laws can help you see the importance of having a will and planning your estate.

Intestate Succession in Texas

Intestate succession laws in Texas dictate how an estate is divided when you die without a will. The specifics depend on whether you were married, had children, or other close relatives. Here’s a breakdown of the primary scenarios:

1. Survived by Spouse and Children

If you are survived by a spouse and children, the estate is divided based on whether the children are from your current marriage or a previous relationship. If all children are from the current marriage, your surviving spouse receives all your community property (property acquired during the marriage) and one-third of your separate personal property (property acquired before your marriage or by gift or inheritance). The remaining two-thirds of your separate personal property and your separate real estate are divided among the children.

If you had children from a previous relationship, your surviving spouse retains their half of the community property and one-third of the separate personal property. Your children inherit your half of the community property, two-thirds of your separate personal property, and all of the separate real estate.

2. Survived by Spouse, No Children

If you are survived by a spouse but have no children, your surviving spouse inherits all community property and all your separate personal property. Your separate property real estate is divided, with your spouse receiving one-half and your living parents or siblings receiving the other one-half.

3. Survived by Children, No Spouse

If you are survived by children but no spouse, your entire estate is divided equally among the children. This includes both community and separate property.

4. No Spouse, No Children

If you leave no spouse or children, your entire estate is divided among other relatives in the following order of priority: parents, siblings, nieces and nephews, grandparents, aunts and uncles, and cousins.

The Probate Process

In addition to your property passing in a manner that you may not find in accordance with your wishes, when you die intestate in Texas, your estate may go through a more complicated probate process. This is a legal process where the court oversees the distribution of the deceased's assets according to state law. Here are the key steps in the probate process for an intestate estate:

1. Determination of Heirship: In order to determine who the proper heirs are to your estate, a court hearing will need to be held to determine who your actual surviving heirs are according to the Texas Estates Code. An attorney ad litem will have to be appointed to represent all possible heirs (a cost paid from your estate). The probate administration cannot proceed until this hearing is held, which might be anywhere from one to three months after your death.
   
   
2. Appointment of an Administrator: The court appoints an administrator to manage the estate. This person is usually a close relative, such as a spouse or adult child. If no relatives are available, the court may appoint a neutral party.
   
   
3. Inventory and Appraisal: The administrator must create an inventory of the deceased's assets and have them appraised. This includes real estate, personal property, bank accounts, and investments.
   
   
4. Notification of Creditors: The administrator must notify creditors of the deceased’s passing and settle any outstanding debts from the estate.
   
   
5. Distribution of Assets: After debts and expenses are paid, the remaining assets are distributed to the heirs according to Texas intestacy laws.

Challenges and Complications

Dying without a will can lead to various complications and challenges:

• Family Disputes: Intestacy can lead to disagreements among family members about who should receive what portion of the estate.
  
  
• Increased Costs: The probate process for an intestate estate can be more time-consuming and expensive than for an estate with a clear will as there will be additional paperwork, court filings and appearances on behalf of the attorney.
  
  
• Unintended Heirs: Without a will, the state’s default rules apply, which may result in assets going to relatives you did not intend to benefit.

Conclusion

Dying without a Last Will and Testament in Texas can create a complex and often stressful situation for your surviving family members. The state’s intestacy laws provide a framework for distributing assets, but this process may not reflect your wishes and can lead to confusion, increased attorney costs and delays. 

Creating a will ensures that your estate is distributed according to your desires and can provide peace of mind for both you and your loved ones. Planning ahead is a crucial step in managing your legacy and protecting your family’s future.  Howell Legacy Planning can assist with your estate plan so you don't have to encounter the issues outlined in this post.