Bennie F., Sr. executed a Statutory Durable Power of Attorney (SDPOA) appointed Bennie F., Jr., as his agent to handle his financial affairs. When Senior became incapacitated, Junior presented the SDPOA to James R., his father’s financial planner. However, James refused to honor the SDPOA and denied Junior access to and authority to make investment decisions for his father’s investments.
Third Parties Generally Must Honor the SDPOA Absent Certain Actions or Exceptions
The law determining obligations of a third party, such as this financial planner, to accept a SDPOA has changed, effective September 1, 2017. William D. Pargaman, in his legislative update regarding estate, guardianship and trust law published in the September, 2017, Vol.8, No. 8 edition of the Texas Bar Journal, declared these changes are the most significant and controversial regarding powers of attorney. The new provisions of Texas Estates Code §751.206, require any third party presented with a SDPOA to accept and honor the SDPOA unless certain exceptions apply. The third party may request a certification of certain facts or an attorney’s opinion regarding a matter of law concerning the POA if done within 10 days of presentation.
Texas Estates Codes §751.203 provides the form the third party may use to request the fact certification. For example, a third party might request that the agent certify that his or her power to act has not been terminated or is not affected by some other agreement. If the agent makes the certification requested, that certification is exclusive proof of the fact certified.
When a request for certification or attorney’s opinion is made, the third party must accept the SDPOA within 7 business days after the certification or attorney’s opinion is received. The attorney’s opinion is at the expense of the principal, not the requesting third party, unless the third party has requested an extension of the 10 day limit on refusing to honor the power.
Grounds for Refusing to Accept a SDPOA
Texas Estates Code §751.206 provides a number of circumstances in which a third party may refuse to accept a power. For instance, the third party would not be required to engage in the transaction proposed with the principal under the same circumstances.” One such “circumstance” might be asking to establish a customer relationship that doesn’t already exist. Another might be that the agent seeks to acquire a product or service that the third party doesn’t offer.
Not surprisingly, the third party can refuse if acceptance of the power would interfere with a state or federal law or regulation. If the third party has filed a “suspicious activity” report with regard to the agent or in good faith believes the agent to have a criminal record, the third party can refuse to accept the SDPOA.
The third party can refuse to honor the power if the third party has had an “unsatisfactory business relationship.” Unsatisfactory business relationships include substantial financial loss, there was financial mismanagement by the agent, litigation between the third party and the agent alleging substantial damages, or multiple lawsuits filed by the agent.
Of course, the third party can refuse to accept the power if the third party has actual knowledge that the principal had terminated the power presented, that a judicial proceeding has declared the power invalid or a judicial proceeding testing its validity is in progress. If the third party requests a certification or attorney’s opinion and the agent refuses to comply with the request, grounds for refusal to acknowledge the power exist.
When the third party has knowledge that a report has been made to law enforcement or to a protective agency that the principal may be subject to physical, financial abuse, neglect, exploitation or abandonment by the agent, refusal to accept is justified.
If there are co-agents and the third party receives conflicting instructions regarding a matter subject to the power, the third party may validly refuse to accept the power.
Effects of Changes in the Law Regarding Acceptance of SDPOAs
It remains to be seen how the requirement that third parties accept a power of attorney, unless one of the enumerated exceptions apply, will play out in the marketplace. Families have to rely upon and utilize valid SDPOAs when they are needed. If requests for certification of facts and requests for attorney’s opinions regarding the law are used only when they are necessary and prudent, the public will be served. If they are used inappropriately they will create unnecessary expense and frustrate families in taking care of the financial affairs of their incapacitated loved ones.
Sandra W. Reed is an attorney with Katten & Benson, an Elder Law firm in Fort Worth. She lives and practices in beautiful Somervell County, near Chalk Mountain.