I am trying to decide what legal documents to include in my estate plan. I will probably only need a simple Will, as my assets are fairly modest. Would it be a good idea to also give someone I can trust a Power of Attorney, to act for me in the event I become incapacitated and am no longer able to manage my affairs?
Powers of Attorney can be either “General” or “Durable.” General Powers of Attorney become effective immediately, when signed. Durable Powers of Attorney do not become effective unless and until the person who executed the Durable Power of Attorney becomes incapacitated.
Powers of Attorney can also be either “Statutory” or custom-drafted by a lawyer. Texas, like many states, allows custom-drafted Powers of Attorney, but also provides a statutory form of Power of Attorney. A Statutory Power of Attorney is usually nothing more than a legal document that is copied – often verbatim – from the language of a statute that sets forth the actual language that may be used in a Power of Attorney document.
Powers of Attorney are typically used as one of many estate planning tools. For example, a Client who needs an estate plan might hire an attorney to draft a “simple” Last Will and Testament (“Will”). The estate planning attorney may offer (usually for a modest additional fee) to include, along with the Will, a Power of Attorney document which will allow a third party to manage the Client’s financial affairs.
All appears in order.
But there is a slight problem. No Texas statute that requires Texas financial institutions to honor Power of Attorney documents and, without such a law, many (if not most) Texas financial institutions will refuse to do so. Why? Simply because the risk of honoring such documents is substantial, compared to the negligible risk of refusing to do so. In other words, the probability that a financial institution would be successfully sued for honoring an invalid Power of Attorney is substantially greater than the probability of a successful lawsuit against the institution for refusing to honor a valid Power of Attorney. Thus, whether to honor Powers of Attorney documents is nothing more than a business decision which is calculated to minimize potential civil liability.
The good news, however, is that there is an alternative to traditional Powers of Attorney forms that often accompany a Will.
A Trust is an estate planning alternative to a Will. When a Trust opens an account at a financial institution, the Trust has a relationship with that financial institution which, in a material sense, is no different than that of any other depositor. Thus, the Trustee of a Trust usually experiences none of the difficulties that a person acting under a Power of Attorney is likely to encounter.
Trusts offer many advantages over Wills, but are also somewhat more expensive to create than are Wills. Perhaps this is a good application of the old adage of not being penny-wise and pound-foolish.
For more information on this topic, click here to: Contact Lapin Law Offices
Lapin Law Offices, P.C.
5001 Spring Valley Road, Suite 400 East
Post Office Box 802401
Dallas, Texas 75380
Disclaimer: The information contained in this publication is provided by Lapin Law Offices, P.C., for informational purposes only and, shall not constitute legal advice or create an attorney-client relationship. The laws and interpretation of laws discussed herein may not accurately reflect the law in the reader’s jurisdiction. Do not rely on the information contained in this publication for any purpose. If you have a specific legal question, please consult with an attorney in your jurisdiction who is competent to assist you.