The new law on the Durable Power of Attorney will surprise and dismay both principals and agents.
Two brand-new sections focus on the appointment and authority of agents. One change provides that if two or more persons are appointed as co-agents, then each can exercise authority independently of the other agent. That means it only takes one of the agents to act. This provision is intended to give added flexibility to the agents, but just imagine what will happen if they disagree – such as Agent 1 directing the broker to buy more stocks, and Agent 2 directing the broker to liquidate all of the stocks. It will be chaos leading to gridlock.
The principal can avoid that by naming just one agent or by specifying which of the co-agents has authority to take specific actions.
The new law has a provision clarifying when an agent actually accepts the appointment – it has to be by the agent exercising authority under the power, or some other affirmative conduct. This is designed to avoid imposing a fiduciary duty on some hapless sap who was unaware that he had even been named an agent on a power of attorney.
A principal can now designate someone to appoint a successor agent when the original agent can no longer serve. This is a very important guardianship-avoidance provision. Suppose the principal has dementia and the original agent dies. Under the existing law, the Power of Attorney would fail because there is no existing agent and the principal no longer has the capacity to appoint a successor agent. Under the new law, a principal could actually name someone in the document who had the authority to appoint a successor agent.
The new law clarifies that an agent ceases to serve when he resigns, dies, becomes incapacitated, is not qualified to serve, or declines to serve.
For Powers of Attorney signed after September 1, 2017, an agent, by default, is entitled to be compensated and reimbursed expenses. This changes existing law which forbids compensation unless it is specifically authorized in the Power of Attorney. Under the new law the burden switches, and if the Principal envisions that an agent will serve merely for honor and glory, then the Power of Attorney will have to specify that the agent should not be compensated.
In another big change, in Powers of Attorney signed after September 1, 2017 an agent may be expressly authorized to modify, create or terminate a revocable trust, change a right of survivorship designation on an account, change a beneficiary designation, and delegate authority under the power of attorney. Under current law, these actions cannot be delegated to an agent.
You may have noticed that some changes will only apply to documents signed on or after September 1, 2017. In short, this simple document is about to become very complicated. Your safe bet is to review your existing Power of Attorney with a real attorney and discuss your options.
Hammerle Finley Law Firm. Give us a call. We can help.
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The information contained in this article is general information only and does not constitute legal advice.