The 2017 Texas Legislature passed a number of measures that impact a Statutory Durable Power of Attorney (SDPOA), the device that families use to allow another person to handle financial affairs. These changes went into effect on Sept. 1. A number of choices in the recommended form for naming an agent remain the same.
What Remains the Same with the SDPOA?
Time of Implementation
The principal establishing a SDPOA has a choice of making it immediately effective or requiring that, before the authority of the agent goes into effect, a physician declare the principal incompetent to handle his or her financial affairs.
The principal still has the choice whether to give the agent authority to make gifts to third parties from the resources belonging to the principal.
Choice of Powers
The principal still may select certain powers to give the agent and withhold other powers. Alternatively, the principal may grant all listed powers. These powers from the prior version are still included: (A) Real property transactions; (B) Tangible personal property transactions; (C) Stock and bond transactions; (D) Commodity and option transactions; (E) Banking and other financial institution transactions; (F) Business operating transactions; (G) Insurance and annuity transactions; (H) Estate, trust and other beneficiary transactions; (I) Claims and litigation; (J) Personal and family maintenance; (K) Benefits from social security, Medicare, Medicaid, or other governmental programs or civil or military service; (L) Retirement plan transactions; and (M) Tax matters.
What Has Changed with the SDPOA?
Compensation to Agent
The new SDPOA form allows the principal to choose whether the agent will be limited to recovery of reasonable expenses incurred on behalf of the principal or also allowed to receive reasonable compensation for his or her services as agent.
The new SDPOA recognizes the importance of giving authority to manage digital assets and content of electronic communications by including that as an added power.
The new SDPOA may include special instructions applicable to digital assets that flesh out the extent of the power given. For instance, the POA might give the power to take control of, handle, continue, transfer, or terminate any digital assets. The agent may be given the power to exercise any right under any contract or license relating to any digital asset.
The SDPOA might include a definition of “digital assets.” It could state that these include, but are not limited to: email accounts, online currency, online banking records, social media accounts, digital music, digital books, digital photos, digital videos, software licenses, website registrations, domain registrations, web hosting accounts and, in general, any electronic data (including settings or administrative data) that are stored on any device or medium or by any remote-computing service.
Special Powers Added
The principals can now grant the agent these additional powers: (1) to create or terminate a trust the principal has established during his or her lifetime; (2) create or change rights of survivorship; (3) create or change a beneficiary designation; or (4) authorize another person to exercise the authority granted under this power of attorney. However, a principal considering granting that power should be cautioned that doing so will give the agent the authority to take actions that could significantly reduce property or change how property will be distributed at the principal’s death.
Requirement to Preserve the Principal’s Estate Plan
Under newly added Texas Estates Code (TEC) §751.122, the agent has a duty to preserve the principal’s estate plan of which the agent has actual knowledge. Unfortunately, the TEC does not provide a statutory definition of “estate plan.” This duty to “preserve to the extent reasonably possible” the principal’s estate plan creates additional problems. The agent must grapple with the question of how to weigh and balance the numerous factors that an individual takes into account when determining what estate planning to implement. For example, if choices must be made about support for an incapacitated parent, does the duty imposed to preserve the estate plan require that the expense of that maintenance be minimized in order to preserve assets for children, where a Will provides for gifts at death to children?
A SDPOA is a crucial planning tool for seniors to avoid problems in the event of incompetency. Since many lawyers suspect litigation to arise from application of this new requirement to existing and future powers of attorney, it is more important than ever that seniors seek competent legal advice when creating and signing a SDPOA.
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.